Jumbo Loans vs. Conventional Loans: What Homebuyers Need to Know

When you're shopping for a home priced above $1,000,000, choosing the right financing strategy becomes more than just checking current mortgage rates. For many buyers in Texas and beyond—especially in neighborhoods like Westlake Hills, Tarrytown, and Barton Creek in Austin—that means understanding the tradeoffs between jumbo loans and conventional conforming loans. These two different mortgage programs may look similar at first glance, but they follow different rules, offer different pricing, and serve different purposes. Let’s break down the differences in qualifications, structure, and benefits so you can make the most informed decision in 2025.

What’s the Key Difference Between Jumbo and Conventional Loans?

The key difference lies in whether the loan amount falls within the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits determine whether a loan can be classified as a conventional mortgage that conforms to government-sponsored enterprise (GSE) standards—meaning it's eligible to be purchased by Fannie Mae or Freddie Mac. If your loan amount exceeds these limits, it's considered a jumbo or non-conforming loan, which means it must be held by the lender or sold to private investors, often with stricter qualification requirements. Understanding where your home purchase falls in relation to these thresholds is crucial, as it affects everything from your interest rate and approval process to down payment expectations and long-term flexibility.

• In 2025, conforming loans are capped at $806,500 in most parts of Texas, and up to $1,209,750 in high-cost areas like Los Angeles County or the MDW area.

• A jumbo loan—also called a non-conforming loan—exceeds those limits and can’t be backed by Fannie Mae or Freddie Mac.

Conforming loans typically come with more flexible qualification criteria (and lower mortgage rates relative to jumbo loans), because they’re backed by Fannie Mae and Freddie Mac. These government-sponsored enterprises (GSEs) provide a level of security to lenders, reducing risk and allowing for more lenient standards on credit score, down payment, and debt-to-income ratio. In contrast, jumbo loan qualifications are more demanding because the lender assumes all the risk without GSE support. It’s not just about the rate—you also have to consider reserve requirements, loan-to-value limits, and the borrower profile. These differences in guidelines can have a major impact on which loan type you qualify for and how much you’ll pay over time. To help you compare the essentials, here’s a side-by-side look at how jumbo and conforming loans stack up.

Jumbo vs. Conforming Loan Comparison Table

Jumbo Loan Qualifications: What Lenders Look For

To qualify for a jumbo mortgage, lenders scrutinize a borrower’s full financial picture. Most lenders will want to see:

• A credit score of 700 or above

• A low debt-to-income ratio (typically no more than 43%)

• Substantial cash reserves (typically 6–12 months of payments, though this can vary based on loan size and down payment)

• Strong, verifiable income—often supported by W-2s, tax returns, and bank statements

Buyers with excellent financials may qualify for low down payment jumbo loans—sometimes as little as 10%. And in competitive scenarios, we’ve structured successful 80/10/10 jumbo mortgage combos to avoid the stricter standards of a jumbo loan and get the borrower a lower blended mortgage rate. So what is a 80/10/10 mortgage.

What Is an 80/10/10 Mortgage?

The myth that you need 20% down for a jumbo loan is just that—a myth. An 80/10/10 mortgage is a home financing strategy where the buyer combines a conforming first mortgage covering 80% of the home’s value, a second mortgage for 10%, and makes a 10% down payment. This structure allows borrowers to avoid jumbo loan requirements entirely by keeping the first mortgage within the conforming loan limits.

For example, on a $1,000,000 home:

• The first mortgage would be $800,000 (within conventional conforming limits)

• The second mortgage would be $100,000

• The down payment would be $100,000

This approach offers several benefits:

• Avoids the stricter jumbo loan qualifications, like higher reserves and lower max DTI

• Eliminates private mortgage insurance (PMI) despite putting down less than 20%

• Can result in a lower blended mortgage rate when compared to a full jumbo loan

An 80/10/10 structure is especially useful in high-cost markets or for buyers who want to keep more cash on hand. It’s also a strong option for buyers with high incomes but who are just shy of jumbo credit or reserve requirements.

ARM Loans for Jumbo and Conforming Mortgages

Both conforming and jumbo loans offer ARM options, including 5/6, 7/6, 10/6, and 7/1 structures. ARM loans start with a lower introductory rate for a fixed period before adjusting annually. This can be a smart strategy for buyers who:

• Expect to move or refinance within 5–10 years

• Want lower initial monthly payments

• Are confident in rising income or future liquidity

At LendFriend, we’ve seen ARMs gain popularity again in recent years. In fact, we recently wrote about why ARMs are making a comeback in today’s high-rate market. With jumbo and conforming rates still elevated, many buyers are choosing ARMs to unlock immediate savings and refinance later if rates drop.

Jumbo ARMs, however, often come with stricter caps and margins, so understanding long-term exposure is key. Make sure you work with a lender who can break down the fully indexed rate and potential future adjustments—especially if you're leaning into a jumbo loan strategy.

Pros and Cons of Jumbo and Conforming Loans

Pros of Jumbo Loans

• Access to higher loan amounts — ideal for financing luxury homes or properties in high-cost areas

• No PMI required even with less than 20% down — a major jumbo loan benefit for well-qualified buyers

• Competitive jumbo ARM and fixed-rate mortgage options available

• Jumbo loan programs are designed for high-income earners who meet stricter jumbo loan requirements

• No PMI required even with less than 20% down

• Competitive jumbo ARM and fixed-rate options available

• Ideal for buyers in luxury or high-cost markets

Cons of Jumbo Loans

• Higher credit and reserve requirements — lenders typically look for credit scores above 700 and 6–12 months of reserves

• Lower max DTI (typically 43–45%) — which can limit approval for high DTI jumbo borrowers

• Manual underwriting — which may slow the process and require more documentation

• Rates can be higher depending on lender — especially when compared to conforming loan rates

• Lower max DTI (typically 43–45%)

• Rates can be higher depending on lender

Pros of Conforming Loans

• Easier to qualify with lower credit and income — thanks to GSE-backed conforming loan guidelines

• Higher max DTI (up to 50%) — a huge advantage for borrowers with high debt-to-income ratios

• Broader lender options and stronger rate competition — increases the chance of securing a lower interest rate

• Lower down payment options (as low as 3%) — excellent for first-time homebuyers using conforming loans

• Higher max DTI (up to 50%)

• Broader lender options and stronger rate competition

• Lower down payment options (as low as 3%)

Cons of Conforming Loans

• PMI required if putting down less than 20% — which can raise monthly payments for low down payment borrowers

• Loan limit caps may require second mortgage — leading to more complex loan structuring if the home price exceeds local limits

• Loan limit caps may require second mortgage

Which Strategy Is Best for You?

The right choice depends on your financial goals, timeline, and how you want to structure your loan.

• Buying a $1M home with less than 20% down? Consider an 80/10/10 jumbo mortgage.

• Low on cash for a down payment? A jumbo loan 10 percent down may still qualify.

• Have strong income but a high DTI? Stick with a high balance conforming loan and use a second.

Whether you’re comparing jumbo vs. conventional rates, searching for the best jumbo mortgage lender, or exploring options for a high DTI jumbo borrower, understanding the nuances will help you save money and qualify confidently.

Who Is the Best Jumbo Loan Lender?

There’s no one-size-fits-all answer—but some lenders specialize in jumbo loan programs with flexible qualifications, competitive rates, and fast closings. The best jumbo loan lender for your situation depends on your credit profile, desired down payment, and income structure. However, the smartest way to navigate a jumbo loan is by working with a mortgage broker—not a bank.

Brokers like LendFriend can shop your loan across dozens of lenders to find the most competitive pricing and flexible guidelines. And if you're pursuing an 80/10/10 jumbo mortgage, we already have relationships with second lien lenders to get that second mortgage approved and closed fast. Banks may offer jumbo loans, but unless you have a private wealth relationship with substantial assets on deposit, their process is often slower, more rigid, and more prone to last-minute hiccups. Even well-qualified borrowers can get tripped up by a bank’s internal overlays. A mortgage broker can help you sidestep those landmines and deliver a smooth, cost-effective solution.

At LendFriend Mortgage, we regularly help clients secure low down payment jumbo loans, navigate jumbo ARM options, and structure 80/10/10 combos that avoid high jumbo rates altogether. Because we’re a broker—not a bank—we shop the best jumbo mortgage rates from dozens of lenders nationwide and tailor the product to your goals.

Whether you're a first-time luxury buyer or looking to refinance a $1.5M home, we can help you compare options across both jumbo and high balance conforming loans and make the smartest financial decision.

Final Thoughts: Get the Right Loan Structure

At LendFriend Mortgage, we help Texas homebuyers qualify smart by tailoring solutions to their specific needs. Whether you're applying for a jumbo loan, exploring conventional loan qualifications, or weighing an ARM vs. fixed structure, we’ll walk you through every option.

 Schedule a call with me today or get in touch with me by completing this quick form, and I'll be able to answer any questions you may have about jumbo vs conventional loans.