Conventional vs Jumbo Loan:
Finance Your High-Value Home
Buying a luxury home in Bergen County or another high-cost area? Understand the key differences between conventional conforming loans and jumbo mortgages to choose the right financing for your high-value purchase.
Quick Comparison at a Glance
Key differences between conventional conforming loans and jumbo mortgages
| Feature | Conventional Loan | Jumbo Loan |
|---|---|---|
| Loan Amount Limit | Up to $766,550 (2024) | Above $766,550 (no limit) |
| Minimum Credit Score | 620-640✓ WINNER | 700-720+ (stricter) |
| Minimum Down Payment | 3-5% (as low as 3%)✓ WINNER | 10-20% (typically 15-20%) |
| Interest Rate | Lower (conforming loan)✓ WINNER | Higher (0.25-0.75% more) |
| Debt-to-Income Ratio | Up to 50% DTI✓ WINNER | Max 43-45% DTI (stricter) |
| Cash Reserves Required | 2 months (or less)✓ WINNER | 6-12 months (higher) |
| Mortgage Insurance | Required if <20% down (PMI) | Often not required (lender-dependent)✓ WINNER |
| Documentation Required | Standard (W-2s, tax returns)✓ WINNER | Extensive (full financial review) |
2024 Conforming Loan Limit: $766,550|Jumbo Loans: Above $766,550 (no upper limit)
Why Choose a Conventional Loan?
Standard conforming loans with easier qualification and lower rates
Lower Interest Rates
Conforming loans backed by Fannie Mae/Freddie Mac typically have rates 0.25-0.75% lower than jumbo loans.
Lower Down Payment Options
Put down as little as 3-5% with conventional loans. Perfect for buyers preserving cash for other needs.
Easier Qualification
More flexible credit score (620+), DTI (up to 50%), and reserve requirements make approval easier.
Standardized Guidelines
Predictable underwriting process with clear, consistent guidelines from Fannie Mae and Freddie Mac.
Why Choose a Jumbo Loan?
Finance luxury homes above conforming loan limits with tailored programs
Finance High-Value Homes
Purchase luxury homes above $766,550 without splitting into multiple mortgages. No loan amount cap.
No Mortgage Insurance (Often)
Many jumbo lenders don't require PMI, even with less than 20% down, saving you monthly costs.
Portfolio Loan Flexibility
Jumbo loans are often portfolio loans held by the lender, allowing for more flexible underwriting in some cases.
Designed for Affluent Buyers
Tailored for high-income, high-net-worth buyers purchasing luxury properties in premium markets like Bergen County.
Qualification Comparison Example
See what it takes to qualify for each loan type on an $800,000 home purchase
$700,000 Home Purchase
(Below $766,550 Limit)
Easier Qualification. Lower Rate.
$1,200,000 Home Purchase
(Above $766,550 Limit)
Stricter Requirements. Finance Luxury Homes.
Jumbo Loan Qualification Checklist
Credit & Income
- ✓700-720+ credit score
- ✓2 years stable income history
- ✓DTI under 43-45%
- ✓No recent bankruptcies/foreclosures
Assets & Reserves
- ✓15-20% down payment
- ✓6-12 months cash reserves
- ✓Documented asset sources
- ✓Low existing debt balances
Which Loan Type is Right for You?
Choose a Conventional Loan If:
- Your home price is below $766,550 (2024 conforming limit)
- You want the lowest possible interest rate
- You prefer easier qualification requirements (620+ credit score)
- You want flexible down payment options (as low as 3-5%)
- You have limited cash reserves (2 months sufficient)
- You want standardized, predictable underwriting
- You're buying in a mid-tier market (Bergen County suburbs)
- You qualify for the lower DTI and reserve requirements
Choose a Jumbo Loan If:
- Your home price is above $766,550 (requires jumbo financing)
- You're buying a luxury/high-value property in Bergen County
- You have excellent credit (700-720+) and qualify for stricter requirements
- You can put down 15-20% (or more)
- You have 6-12 months cash reserves after closing
- Your DTI is below 43-45%
- You want to avoid splitting into multiple mortgages
- You're a high-income, high-net-worth buyer purchasing premium real estate
Frequently Asked Questions
Get answers to common questions about conventional vs jumbo loans
What is the difference between a conventional and jumbo loan?
The key difference is loan amount. Conventional loans are "conforming" loans up to $766,550 (2024 limit) that meet Fannie Mae/Freddie Mac standards. Jumbo loans are "non-conforming" loans above that limit, used for high-value homes. Jumbo loans have stricter qualification requirements, higher rates, and typically require larger down payments and cash reserves.
What is the conforming loan limit for 2024?
The 2024 conforming loan limit is $766,550 for single-family homes in most counties. High-cost areas may have higher limits (up to $1,149,825 in some locations). Bergen County, NJ follows the standard $766,550 limit. Any loan above this amount requires jumbo financing.
What credit score do I need for a jumbo loan?
Most jumbo lenders require a minimum credit score of 700-720, with many preferring 740+ for the best rates. Conventional loans accept scores as low as 620-640. The higher credit score requirement for jumbo loans reflects the larger loan amount and increased lender risk.
How much down payment do I need for a jumbo loan?
Jumbo loans typically require 10-20% down, with most lenders preferring 15-20% to avoid additional scrutiny. Some lenders offer jumbo loans with as little as 10% down for highly qualified borrowers (750+ credit score, low DTI, significant reserves). Conventional loans allow as little as 3-5% down.
Are jumbo loan rates higher than conventional?
Yes, jumbo loan rates are typically 0.25-0.75% higher than conventional loan rates due to increased lender risk. However, the gap has narrowed in recent years. For example, if a conventional rate is 7.0%, a comparable jumbo might be 7.25-7.75%. Highly qualified borrowers can sometimes get jumbo rates competitive with conventional.
What are cash reserves and why do jumbo loans require them?
Cash reserves are liquid assets (savings, checking, investments) you have after closing, measured in months of mortgage payments. Jumbo loans typically require 6-12 months of reserves (sometimes more), while conventional loans require 2 months or less. This ensures you can weather financial disruptions and continue making payments on the larger loan amount.
Do jumbo loans require PMI (mortgage insurance)?
Many jumbo lenders do NOT require PMI, even with less than 20% down—a major advantage. However, you'll face stricter qualification (higher credit score, lower DTI, more reserves) and potentially higher interest rates to offset the lack of insurance. Always compare the total cost (rate + PMI) when evaluating options.
Can I get a jumbo loan if I'm self-employed?
Yes, but qualification is more stringent. Jumbo lenders require 2 years of tax returns, business financials, profit/loss statements, and proof of stable income. They scrutinize self-employed income more carefully due to the larger loan amount. You'll need excellent credit (740+), low DTI, and significant cash reserves (12+ months) to qualify.
Should I get one jumbo loan or a conventional + second mortgage?
It depends: (1) One jumbo loan is simpler—one payment, one lender, one underwriting process. (2) Conventional + second mortgage (piggyback) can sometimes offer better rates or avoid jumbo qualification hurdles, but you have two payments and two lenders. Compare total monthly cost and qualification ease. In most cases, a single jumbo loan is cleaner if you qualify.
What debt-to-income ratio do I need for a jumbo loan?
Jumbo loans typically require a maximum DTI of 43-45% (some allow up to 50% for highly qualified borrowers). This is stricter than conventional loans which allow up to 50% DTI. DTI is your total monthly debt payments divided by gross monthly income. For a $1M jumbo loan with $6,500/month payment, you'd need ~$14,400+ monthly income ($173,000+ annually) at 45% DTI.
Ready to Finance Your High-Value Home?
Whether you need a conventional loan or jumbo financing for your Bergen County luxury home, we'll guide you through qualification requirements and find the best rates for your situation.
Serving Bergen County, NJ and surrounding areas • NMLS #1842935