What’s the Difference Between a Jumbo and Conventional Loan
8/20/2025
If you’re wanting to buy a home, one of the biggest choices you’ll make is how to finance it. This usually means deciding between different types of mortgage loans. And two of the options you might come across are conventional loans and jumbo loans.
So, what’s the difference between a jumbo and conventional loan? In simple terms, it comes down to the loan size and the rules that come with it. Jumbo loans are designed for more expensive homes that go beyond the limits of a conventional loan. Because of that, they tend to have stricter requirements.
Not sure which one is right for you? Don’t worry—we’re here to help break it all down.
Rather talk it through with a real person? Talk with a local expert at Arkansas Federal Mortgage, and we’ll help you find the right mortgage loan for your next home.
What Is a Conventional Loan?
You may have heard of conventional loans, as they’re one of the most common ways to finance a home. You can get one through a bank, credit union, or another private lender, and they come with fixed and adjustable rates and a variety of repayment terms, including 15, 30, and even 40-year options.
To qualify for a conventional loan, most lenders typically look for the following:
- A credit score of 620 or higher
- A down payment of at least 3% (although, some lenders, like Arkansas Federal, offer options with as little as zero down1)
- A debt-to-income (DTI) ratio of 50% or lower
- A loan amount conforming to limits (more on that later)
What Is a Jumbo Loan?
Buying a more expensive home? That’s where a jumbo loan might come in. It’s used when the amount you need to borrow is more than a conventional loan can cover.
Since the loan amount is higher, lenders may ask for more documentation or stronger financials when you’re applying, such as:
- A strong credit score (often 700 or better)
- A larger down payment, usually at least 10%
- Low debt compared to your income
Jumbo Loan vs. Conventional Loan: Side-by-Side Comparison
| Feature | Conventional Loan | Jumbo Loan |
|---|---|---|
| Loan Limit | Must fall within the standard loan conforming limit (adjusted yearly2) | Higher than the standard limit |
| Credit Score | 620+ | 700+ |
| Down Payment | Typically, between 3% – 5% (although some lenders offer 0%) | Typically, 10% or more |
| Private Mortgage Insurance (PMI) | Required if down payment is under 20% | Also required if down payment is under 20% |
| DTI Ratio | 50% or less | 43% or less |
| LTV Ratio | Up to 97% (Some lenders may have 100%) | Usually, 80% or less |
See What Rates You Might Qualify For
Still deciding between loan types? Try our free rate calculator below. Just plug in a few details, like your location, loan amount, and credit score, to see personalized estimates based on today’s numbers.
When to Consider a Jumbo Loan
This type of loan could be a good fit if you’re looking at a home with a higher price tag—one that’s above the usual borrowing limits in your area. It also helps if you have strong credit, solid finances, and enough saved up to put down a larger amount.
People often use jumbo loans for luxury homes, properties in high-cost areas, or places that simply need more financing than a conventional mortgage can offer.
When to Consider a Conventional Loan
Conventional loans are a great option for many buyers, especially if the home you’re purchasing falls within the usual price range. They tend to work well if you have reliable income, good credit, and manageable monthly debts.
These loans can make sense whether you’re buying your first home, upgrading to something larger, or downsizing to something simpler.
Which Loan is Right for You?
The right loan depends on a few things like your budget, the home’s price, and what you qualify for. If you’re looking at a higher-priced property, a jumbo loan might be the only way to borrow enough. But for many buyers, a conventional loan offers everything they need.
Not sure which one fits your situation? We can help.
Apply for a Mortage with Arkansas Federal
Now that you have a basic understanding of what a jumbo and a conventional loan is, and what you’ll need to qualify, you might feel ready to take the next step—and we can help.
Talk to one of our local lending experts about your financial situation and goals for your home, and they can help you determine if a jumbo or conventional loan is right for you. If you’re ready to apply, you can do it in a few minutes online with Arkansas Federal.
Or download our free homebuying guide to help you on your journey.
