Jumbo and Conventional Loan Comparison
Jumbo loans and conventional loans are both types of mortgage loans, but there are some key differences between the two:
Loan amount: Jumbo loans are loans that exceed the conforming loan limit, which is the maximum loan amount that can be purchased by mortgage giants Fannie Mae and Freddie Mac. In most parts of the country, the conforming loan limit is $548,250 for a single-family home. Loans that exceed this amount are considered jumbo loans.
The conforming loan limits for conventional loans in Colorado are determined by the Federal Housing Finance Agency (FHFA) and are based on the median home prices in each county. In most counties in Colorado, the 2021 conforming loan limits for a single-family home are:
- $548,250 for a one-unit property
However, the conforming loan limits for certain high-cost counties in Colorado may be higher. In these counties, the 2021 conforming loan limits for a single-family home are:
- $726,525 for a one-unit property (Boulder, Denver, Douglas, and Broomfield Counties)
It’s important to note that these loan limits apply to conventional loans that are sold to Fannie Mae or Freddie Mac. If you are seeking a loan from a different lender or for a different type of property, the loan limits may be different. You should check with your lender for specific loan limits and eligibility requirements.
Interest rates: Jumbo loans typically have higher interest rates than conventional loans, as they are considered to be a higher risk for lenders. This is because jumbo loans are larger and may be more difficult to sell on the secondary mortgage market.
Down payment requirements: Jumbo loans may have higher down payment requirements than conventional loans. Lenders may require a down payment of 20% or more for a jumbo loan, while a conventional loan may only require a down payment of 3% to 5%.
Credit score requirements: Jumbo loans may have stricter credit score requirements than conventional loans. Lenders may require a credit score of 700 or higher for a jumbo loan, while a conventional loan may be available to borrowers with a credit score as low as 620.
Overall, the main difference between jumbo loans and conventional loans is the size of the loan. Jumbo loans are larger and may have stricter requirements and higher interest rates than conventional loans.