Best Jumbo Loan Lenders of December 2023

Home prices have been rising rapidly in the United States over the past few years and there's no reason to think this will reverse course anytime soon. Because of this, more borrowers are finding that the conventional mortgage loan limits simply aren't high enough to meet their home-buying needs. Fortunately, the best jumbo loan lenders offer mortgages with amounts ranging from the conventional loan maximum all the way to tens of millions of dollars.

Here, we'll discuss some of the most important concepts for jumbo loan borrowers to know, as well as a shortlist of the best jumbo loan lenders to help start your search.

Every year, the Federal Housing Finance Agency (FHFA) sets limits that govern the maximum mortgage loan amounts that are eligible for purchase by Fannie Mae and Freddie Mac, the government-sponsored agencies that purchase mortgages from lenders. This removes the risk of default from the lender itself.

However, the agencies won't buy just any mortgage. In order for their loans to be eligible for purchase by Fannie Mae or Freddie Mac, mortgage lenders must conform to a set of standards. For this reason, these mortgages are commonly referred to as "conforming loans." Among other things, the loans need to be under a certain dollar amount. Mortgages that exceed the conforming loan limits are known as "jumbo loans," or "jumbo mortgages."

In 2023, the conforming loan limit in most of the United States is $726,200 for a single-family home. And it's worth noting that this is the limit for the mortgage itself, not the purchase price for the home. In other words, you can buy a home for $1 million, finance $700,000, and still potentially get a conventional mortgage loan.

This limit is significantly higher in certain areas of the country where the median home price exceeds the standard conforming loan limit by at least 115%. In high-cost areas of the United States, the conforming loan limit for 2023 is as much as $1,089,300 for a one-unit property, determined by the county where the home is located.

Conforming loan limits are also higher for properties with multiple housing units (if you buy a duplex, for example). They are adjusted every year by the FHFA to account for changes in home prices, and can be used to purchase properties with as many as four housing units.

In addition, the common government-backed mortgage programs, including FHA and USDA home loans, also have limits. So, if you want to buy a relatively expensive property, a jumbo mortgage could be your best financing option.

Because they aren't eligible for purchase by Fannie Mae and Freddie Mac, jumbo loans are a significantly larger risk for the banks and other lenders that make them. And naturally, because of their high balances, this risk is substantial.

As a result, jumbo mortgage loans typically have relatively strict qualification standards, higher interest rates than a comparable conforming loan, or both. For example, you can get a conforming loan with a credit score as low as 620. But for a jumbo loan, a borrower with this score would likely face an uphill battle. And unless you're a very strong buyer, you might get a jumbo mortgage interest rate that's significantly higher than the conforming loan average.

Most jumbo lenders don't publish their credit score requirements. However, they generally do want to see above-average credit, meaning a score in the 700s or higher. You're also unlikely to find a jumbo loan with a down payment requirement under 20% (although we've seen 10% down payments with a few jumbo lenders for highly qualified borrowers). And unlike with certain conventional mortgage situations, lenders are unlikely to accept high debt-to-income ratios or other adverse factors.

When it comes to conventional mortgage loans, qualifications are rather standardized. While lenders can use tighter standards than the minimums required, there's an eligibility matrix lenders use when underwriting conforming loans. But with jumbo loans, qualification is largely determined by the lender.

Having said that, you can expect some pretty strict qualifications. While these are not set-in-stone rules, banks and other lenders that offer jumbo mortgage loans typically want to see:

• FICO credit score of 700 or more. Some want even higher scores for jumbo loans.
• Down payment of at least 20%, because jumbo loans are typically not eligible for private mortgage insurance (PMI). Exceptions are possible, but you don't find the 3%-to-5% down payment options that exist for conforming loans.
• Maximum debt-to-income ratio of 45%. This is calculated including all of your other monthly debt obligations, such as credit card payments, in addition to the proposed mortgage payment.
• Reserve requirements that are typically higher than Fannie Mae and Freddie Mac's standards.

Jumbo loan qualifications and the details of the loan programs and terms available vary dramatically between mortgage lenders. So it is extremely important to shop around.

With jumbo loans, small differences in interest rates can make an enormous difference over time. For example, on a $1 million, 30-year fixed-rate jumbo home loan, borrowing at 6.5% instead of 6.75% means almost $60,000 in interest savings over the life of the loan.

Our suggestion? Start with our list of the best jumbo lenders. Pick a few whose loan products and qualification standards sound like they meet your needs. Then apply for a pre-approval with all of them. It won't hurt your credit to do so (the FICO formula specifically allows for rate-shopping) and it could potentially save you tens of thousands of dollars.

Learn more: How to Shop for a Mortgage

Research: The Largest Mortgage Lenders

Even if you are a highly qualified buyer, you're likely to get significantly different interest rate offers from different lenders. Remember -- jumbo loans aren't a standardized product like FHA loans or conforming mortgages. There's more difference between underwriting methods of each mortgage lender.

Most major mortgage lenders offer jumbo loans, but the right lender for you can vary. The best course of action is to start with our top picks, choose a few that seem to be the best fit, and apply with all of them to see which offers you the best rate.

The obvious advantage of jumbo loans is that they aren't limited by size. In markets where the average home price is in the ballpark of $1 million or higher, conforming mortgages aren't much help to the typical buyer. And, because loan qualification is determined by lenders, they might be more inclined to take your personal situation into account. Finally, you typically don't have to pay mortgage insurance on a jumbo loan, even if you find one with a down payment under 20%.

On the other hand, there are some big disadvantages. We've already mentioned the potentially stricter qualification standards and higher mortgage rates. It's also worth noting that jumbo loans can have significantly higher closing costs than conforming loans, especially if you plan to borrow millions of dollars. For example, before a lender makes a massive mortgage loan that it intends to hold on its own balance sheet, it may require several appraisals of the property you want to buy.