Jumbo Loans: Pros and Cons

Explore the advantages and disadvantages of jumbo loans, also known as non-conforming loans, in comprehensive guides. Learn how these high-value mortgages can provide greater purchasing power, but also entail potential risks. Make informed decisions on jumbo loans with expert analysis and insights.



A jumbo loan is a type of mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These loans are not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac, which makes them a less common choice for borrowers. However, they are often the only option for those looking to finance luxury properties or homes in competitive real estate markets. While jumbo loans can be a viable option for some, they also come with their own set of pros and cons that borrowers should carefully consider.

Pros of Jumbo Loans

  • Financing for High-Priced Homes

The most obvious benefit of jumbo loans is that they allow borrowers to finance high-priced homes that exceed the conventional loan limits. This can be particularly useful in areas with high cost of living, such as San Francisco or New York, where even average homes can surpass the conforming loan limit.

  • Competitive Interest Rates

Despite the common belief, jumbo loans may offer competitive, and sometimes even lower, interest rates compared to traditional mortgages. This is due to the fact that the lenders consider jumbo loan borrowers as lower risk because of their strong credit profile.

  • Flexibility 

Jumbo loans can provide greater flexibility in terms of the loan terms and payment options. They can be structured as adjustable-rate or fixed-rate mortgages, and some lenders may even offer interest-only payment options.

Cons of Jumbo Loans

  • Stricter Underwriting Standards

Qualifying for a jumbo loan can be more difficult than qualifying for a conventional loan because they come with stricter underwriting standards. Borrowers often need a high credit score, low debt-to-income ratio, and a substantial down payment.

  • Higher Down Payments

Jumbo loans usually require higher down payments, often 20% or more of the home's value. This can make it more challenging for some borrowers to afford the upfront costs of buying a home.

  • Potential for Higher Interest Rates

While jumbo loans can sometimes offer competitive interest rates, they can also come with higher rates compared to conventional loans. This is because jumbo loans cannot be sold to Fannie Mae or Freddie Mac, which means the lenders have to take on more risk.

Popular Jumbo Loan Providers

  • Quicken Loans: Known for its excellent customer service and streamlined online application process, Quicken Loans offers jumbo loans with competitive rates and flexible terms.

  • Chase: As one of the leading banks in the US, Chase offers a variety of jumbo loan options with the potential for relationship discounts.

  • SoFi: Known for its student loan refinancing, SoFi also offers jumbo loans with competitive rates and unique benefits such as unemployment protection.

  • Wells Fargo: As the largest mortgage lender in the US, Wells Fargo offers a wide range of jumbo loan options with the potential for relationship discounts.

Jumbo loans can be a valuable tool for those looking to finance high-priced homes, offering competitive interest rates and flexibility. However, they also come with potential drawbacks such as stricter underwriting standards and higher down payments. Therefore, it is crucial for potential borrowers to carefully consider the pros and cons, and consult with a financial advisor or mortgage professional to determine if a jumbo loan is the right fit for their financial situation. And, as with any financial product, it's important to shop around and compare options to ensure you're getting the best deal.