Jumbo vs Conventional Loan: Which is Best for Me?

They’re called Jumbo for a reason; Jumbo Loans are a big investment. That’s why UHL is here to help you first choose between a Jumbo vs Conventional Loan and then make getting pre-approved for the right loan a breeze.

Jumbo vs Conventional Loan

Which is right for you? The short answer is that a Jumbo Loan is the way to go when the loan amount you need surpasses the conforming loan limit. As of 2022, the limit is $647,200 in most parts of the country. Freddie Mac and Fannie Mae only cover loan values below the conforming limit, meaning those that surpass it, require a Jumbo Loan from an investor. 

Monthly Payments – Jumbo vs Conventional Loan

A larger loan amount means larger monthly payments. However, you may be surprised at how comparable monthly payments are between Jumbo and Conventional Loans. 

For example, let’s say you put 10% down on House A, which costs $640,000. You obtain a Conventional Loan at a fixed rate for 30 years. At today’s current interest rate* of 5.990% (6.186% APR), your monthly payment will come in at $3,663.

Now let’s say you bump up the budget into Jumbo Loan zone. You’re now going to put 10% down on House B, a $700,000 home with a 30-year fixed Jumbo loan. At today’s current Jumbo rate* of 5.375% (5.485% APR), your total monthly payment is $3,895. 

A bigger house without that much bigger a monthly payment. It seems too good to be true, we know, but it isn’t!

You & Your Lender

However, a bigger loan still means a bigger risk for your lender. Therefore, there are some stricter standards for Jumbo vs Conventional Loans that you must meet to be approved. These requirements include your credit score, LTV, and DTI. Check out some specifics on qualifying here. 

Pros & Cons

So let’s say you qualify, but you are still debating a Jumbo vs Conventional Loan. Here are a few more things to consider…

Pros

• A Jumbo house is typically one that has everything you’re looking for. Therefore, the home’s longevity and quality may make it the right purchase for you. 
• Low down payment options from lenders like UHL make Jumbo Loans more attainable for buyers who don’t want to have to put 20% down. 
• There are a variety of loans to which Jumbo Loans apply, including VA and Doctor Loan Programs. 

Cons

Even with comparable monthly payments, the more house you buy, the larger your down payment will be. For instance, your initial down payment on a Jumbo Loan will likely require more cash to close. In the above scenario, House A would have a down payment of $64,000 whereas House B would have a down payment of $70,000. 

The Bottom Line

Sorting out your choice between a Jumbo vs Conventional Loan is much easier with a pre-approval in hand, so give our team a call today!

*Rates current as of August 3, 2022

Based on a 720 credit score or higher and 60-day lock term. Private Mortgage Insurance (PMI) will be required when putting less than 20% down. Monthly payment listed here does not include PMI, taxes and insurance premiums. The actual payment amount will be greater. APR stands for annual percentage rate. Subject to underwriting requirements. Not all applicants will qualify.