The difference between conforming and jumbo loans lies in size and approval standards: conforming loans meet limits set by the FHFA and get federal backing, while jumbo loans exceed those limits and face stricter requirements. In 2025, with conforming loan caps rising to around $750,000, buyers targeting high-cost properties will likely need jumbo loans—requiring higher credit scores, bigger down payments, and tighter debt-to-income ratios to qualify.
What is a Jumbo Loan? (And Why Should You Care?)
A jumbo loan is a mortgage that’s too big for the Federal Housing Finance Agency (FHFA) to back through Freddie Mac or Fannie Mae.
Here’s the deal — the FHFA sets a maximum loan limit each year for what’s considered “conforming.” Anything above that number is considered a jumbo loan. For 2025, estimates suggest these are the likely conforming loan limits:
| Property Type | Contiguous U.S. | High-Cost Areas |
|---|---|---|
| 1-Unit | $750,000 (projected) | $1,125,000 (projected) |
| 2-Unit | $960,000 (projected) | $1,440,000 (projected) |
If you want to borrow more than the numbers above, banks won’t treat your mortgage like it’s “standard.” You’re getting a jumbo loan. And the rules are simply… tougher.
Jumbo Loans vs. Conforming Loans — What’s the Difference?
Time to clear the fog. People confuse this all the time.
Here’s how these two stack up:
- Conforming loans: Backed by Fannie Mae or Freddie Mac. Lower interest rates. Easier underwriting.
- Jumbo loans: Too large to qualify for federal backing. Higher rates. Stricter lender requirements.
And that’s not just talking requirements. It changes your whole path to approval:
- Bigger down payment — Lenders often want 10% to 20% minimum on jumbos.
- Stronger credit — You’ll usually need a 700+ credit score.
- Lower DTI — Debt-to-income ratios? They’re watching closely, typically under 43% max.
Bottom line: The difference between conforming and jumbo loans isn’t just the loan size. It’s the playbook you’ve got to follow to get that approval.
Planning to buy a home over $750K in 2025? You’re likely going jumbo.
Why Jumbo Loans Matter in 2025
Housing prices aren’t cooling off. Especially if you’re investing in places like Austin, Nashville, Miami, or pockets of California and New York. You’ll cross conforming loan limits real quick.
Here’s how this plays out for real estate investors, homebuyers, and even STR operators:
- Investors buying multi-units that exceed conforming limits are left needing private, non-backed financing (aka jumbo loans).
- Short-term rental property owners often shop in luxury markets where basic mortgage rules don’t apply.
- Anyone upgrading to high-end neighborhoods will want to know what jumbo requirements look like before even applying.
This is why we keep talking about Freddie Mac vs. Fannie Mae on the reAlpha blog. You gotta know the funding game to win in this market.
How to Get Ready for a Jumbo Loan in 2025
Alright — let’s say you’re ready to go big. Preparing now means less stress when it’s showtime.
Here’s the prep list I give any client flirting with jumbo territory:
Lock in your credit score
- Target 720+, minimum 700.
- Fix late payments, settle collections.
- Don’t open new lines of credit before applying.
Show them your assets
- Have at least 6 to 12 months of mortgage payments in reserve savings.
- That’s in addition to your down payment.
- They’ll want statements, so keep paper trails squeaky clean.
Watch your DTI
- Debt-to-income should ideally be under 38%, no more than 43% tops.
- Consider paying down smaller loans to help reduce your monthly obligations.
If your finances are messy? Lenders get nervous. Jumbo loans aren’t just about more money—they’re about more risk. So you need to look as safe as you are smart.
How Investors Use Jumbo Loans Like Leverage
Some of the savviest investors I know use jumbo loans to gain leverage and play in big markets.
I worked with a real estate investor in Scottsdale recently. The property was $1.4M. Conforming cap in the area? $850K. They put 20% down, used a jumbo loan for the rest, and locked in a 7.1% rate because they came prepared — tax returns, reserves, low DTI. Clean package.
Now they’re cash-flowing $6,800/month after the mortgage, on a portfolio-quality STR. That’s the power of getting your jumbo loan game tight.
Want to learn how to scale with loans? Bookmark our guide: How to Scale Your Portfolio with DSCR Loans.
Quick Rundown: Pros and Cons of Jumbo Loans
| Pros | Cons |
|---|---|
| Access luxury or high-cost markets | Stricter underwriting standards |
| Tap into bigger investor properties | Higher down payments (10–20%) |
| Great for second homes or STRs | Usually higher interest rates |
FAQs
What is the 2025 jumbo loan limit?
Projections say around $750,000 for a single-family home in average markets, and $1,125,000 in high-cost areas. Anything above that? Jumbo territory.
Can I get a jumbo loan with 10% down?
Yes — but only if your credit score and income are rock solid. Most lenders prefer 20% down, but you can find 10% options with strong financials.
What’s the main difference between conforming and jumbo loans?
Conforming loans qualify for backing by Freddie Mac and Fannie Mae. Jumbo loans do not.
Conclusion
In 2025, understanding the difference between conforming and jumbo loans is crucial. Conforming loans meet FHFA limits and offer easier approval, while jumbo loans exceed those limits and demand stronger financial profiles. With home prices rising, many buyers will need jumbo loans, facing higher credit score, down payment, and debt-to-income requirements. Planning ahead can make all the difference.