Jumbo mortgage rates are interest rates for loan amounts that exceed conforming loan limits set by the Federal Housing Finance Agency (FHFA). In 2023, that limit is $726,200 for a one-unit home in most parts of the country — a loan amount above that limit is considered a jumbo loan.
For high-cost parts of the country, you’ll need to search for jumbo mortgage rates if your loan amount is above $1,089,300 for a single-family home. These limits change yearly based on increases or decreases in average U.S. home values over the previous four quarters.
What is a jumbo mortgage?
The term “jumbo mortgage” typically refers to a home loan at a loan amount above the conforming loan limits set each year by the FHFA. However, it can also be a loan of any size that doesn’t fit into other loan categories. These types of jumbo loans often cater to borrowers with poor credit and may not require standard income documentation or may allow for interest-only payments.
Jumbo mortgages are also called “non-conforming loans” because they follow rules set by individual investors, rather than Fannie Mae and Freddie Mac. Jumbo lenders may offer programs on properties that are hard to appraise or for wealthy self-employed borrowers and doctors who are just starting their practices.
How do jumbo mortgage rates work?
Lenders typically hold jumbo mortgages in their loan portfolios, which means they can set interest rates based on their own standards. Investors may price their rates based on a number of factors including credit scores, down payment, size of the loan and the location of the home.
Historically, jumbo rates have been higher than conforming conventional mortgage rates, but during periods of strong economic and housing growth, jumbo rates may actually be lower. The wide variation in rates and programs offered by jumbo mortgage lenders makes shopping around especially important.
What are jumbo mortgage requirements?
Lenders typically set stricter qualifying guidelines for jumbo mortgages. Jumbo mortgage requirements may include:
- A down payment of at least 20%
- A minimum credit score of 700 or higher
- A debt-to-income (DTI) ratio of 45% or lower
- A maximum loan amount of $1 to $2 million
- Several months’ (six to 24 depending on the lender) worth of cash reserves in the bank
Because jumbo loans don’t adhere to rules set by a government agency, some lenders offer niche jumbo programs for borrowers with unusual circumstances such as: