Buying a home is a big deal — especially if it’s the home you’ve always dreamed of. But what if that dream home has a price tag that’s too big for a traditional mortgage? That’s where jumbo loans come into play.
Whether you’re eyeing a home in a high-cost area, need space for a growing family, or simply want more square footage, a jumbo loan can help you finance homes that exceed standard borrowing limits.
What is a Jumbo Loan?
A jumbo loan is a mortgage used to finance properties that exceed the “conforming loan limits” set by the Federal Housing Finance Agency (FHFA). For most of the U.S. in 2025, that limit is $806,500. However, in high-cost areas like Seattle, Portland, or parts of California, the cap rises to $1,037,300.
Any mortgage that exceeds those limits is considered non-conforming and can’t be backed by government-sponsored entities like Fannie Mae or Freddie Mac. Because of this, lenders typically impose stricter standards to ensure borrowers' financial stability.
Why Would You Need a Jumbo Loan?
Jumbo loans are often used when buyers need more borrowing power to purchase:
- Luxury homes or estates
- Properties in competitive real estate markets
- Multi-family or multi-unit residences
- Large vacation homes or second properties
Let’s say you’re purchasing a $950,000 home in the Puget Sound area. Even with a 10% down payment, your loan amount would still exceed conforming limits, making a jumbo loan your go-to option.
What Are the Benefits of Jumbo Loans?
While jumbo loans require more documentation and financial stability, they offer distinct benefits:
- Increased loan amounts. Borrow beyond conventional limits to purchase premium homes.
- Customizable terms. Choose fixed or adjustable-rate structures based on your needs.
- No PMI with larger down payments. With 20% down or more, you may be able to avoid private mortgage insurance.
- One loan for high-value homes. Avoid splitting your purchase into two mortgages.
For buyers who qualify, jumbo loans can provide the flexibility and convenience to make a large purchase easier to navigate.
What Are Interest Rates Like for Jumbo Loans?
A common question is: What are interest rates on jumbo loans? Historically, jumbo loans had higher rates than conforming loans. But today’s market is more competitive. Qualified borrowers can often secure similar or lower rates, depending on the lender and the loan structure.
Lenders typically require the following for jumbo loans:
- A high credit score. Most lenders look for scores of 700 or higher.
- Low debt-to-income (DTI) ratio. Preferably under 43%, but lower is better.
- Larger down payments. Expect to put down at least 10–20%.
- Cash reserves. Some lenders require proof of 6 to12 months’ worth of mortgage payments in savings.
- Detailed documentation. Be ready to share tax returns, pay stubs, asset statements, and more.
This jumbo loan application process can be more intensive than that of other loans, but it helps ensure that borrowers are financially positioned to responsibly manage a higher loan amount.
Why Jumbo Loans Might Not Be the Best Solution
It’s important to consider your financial situation when considering a jumbo loan. There are times when one might not be the best option for you at the moment. Here’s what to think about:
- You’re barely meeting the minimum requirements
- You don’t have much in reserve for emergencies
- You plan to move or refinance in the short term
- You’re not comfortable with additional scrutiny or paperwork.
Consider increasing your down payment to qualify for a conforming loan or exploring combination loans (a primary and secondary mortgage in these cases).
Can You Refinance a Jumbo Loan?
Yes! Jumbo loan refinancing is common, especially when interest rates drop. Refinancing can help you:
- Lower your monthly payment
- Switch from an ARM to a fixed-rate loan
- Tap into home equity for renovations or expenses
Some homeowners use jumbo refinancing as a strategic tool. For example, to refinance into a better rate or access equity for home improvements such as remodeling a kitchen, building a backyard cottage, or installing solar panels.
Finance Bigger Dreams with TwinStar Credit Union
Looking to buy a high-value home in the Pacific Northwest? TwinStar Credit Union offers jumbo home loans with competitive rates, personalized guidance, and flexible terms. Whether it’s your dream home or a long-term investment, we’re here to help you finance confidently. Learn more and apply at TwinStarCU.com.