Jumbo vs Conventional Loans in California: What Borrowers Should Know

Buying a home in California often means facing higher home prices than the national average. That can make choosing between a jumbo loan and a conventional loan an important step in the mortgage process. While both options are considered conventional financing, they have key differences that affect how much you can borrow, how much you need to put down, and what type of qualifications you must meet.

At Equity Capital Home Loans, we help California borrowers navigate these choices every day. Here is what you should know before deciding which loan type works best for your home purchase.

What Is a Conventional Loan?

A conventional loan is a mortgage financed by a private lender rather than backed by the government. Conventional loans can be either conforming or nonconforming.

• Conforming conventional loans meet the standards of the Federal Housing Finance Agency (FHFA), which includes staying under a set loan limit. For 2025, the national conforming limit is $806,500, while in higher-cost California counties it can reach up to $1,209,750.
  
  
• Nonconforming conventional loans do not meet FHFA standards, often because the loan amount is higher than the conforming limit. This is where jumbo loans come in.

What Is a Jumbo Loan?

A jumbo loan is a type of conventional mortgage that exceeds FHFA loan limits. Because these loans are larger, they are considered higher risk for lenders. As a result, jumbo loans come with stricter requirements for approval.

Many lenders in California offer jumbo loans of up to $3 million or more, and some even go higher depending on the borrower’s financial profile. This flexibility allows buyers to finance luxury homes or properties in high-cost markets like Los Angeles, San Francisco, and Orange County.

Key Differences Between Jumbo and Conforming Loans

Here are the main areas where jumbo and conforming conventional loans differ:

• Credit score requirements: Jumbo loans usually require a score of 700 or higher, while conforming loans may allow scores as low as 620.
  
  
• Down payment: Jumbo loans often require at least 20 percent, while conforming loans can be secured with as little as 3 percent down.
  
  
• Debt-to-income ratio: Lenders usually prefer 36 to 43 percent for jumbo loans compared to up to 50 percent for conforming loans.
  
  
• Cash reserves: Jumbo loans may require up to 12 months of reserves, while conforming loans may need only six months.
  
  
• Interest rates: Jumbo loans sometimes carry slightly higher rates, but in competitive markets, they can be equal to or even lower than conforming loan rates depending on the borrower’s financial strength.

Qualifying for a Jumbo Loan in California

Because of the stricter guidelines, qualifying for a jumbo loan requires careful financial preparation. Borrowers should expect to show:

• A strong credit history with a score of 700 or more
  
  
• Proof of stable, high income
  
  
• A sizable down payment, often 20 percent or greater
  
  
• Low overall debt obligations
  
  
• Cash reserves that can cover several months of mortgage payments
  

In California, where property values often exceed conforming limits, many buyers turn to jumbo loans as the only way to purchase the home they want.

Can You Refinance a Jumbo Loan Into a Conforming Loan?

Yes. If your jumbo loan balance eventually falls below the local conforming loan limit, you may be able to refinance into a conforming loan. This can open the door to lower interest rates and more flexible terms.

Mortgage Rates for Jumbo Loans

The interest rate you receive on a jumbo loan depends on market trends as well as your credit score, income, and overall financial profile. While jumbo loans were once always higher than conforming rates, today many lenders in California offer jumbo loan rates that are competitive, especially for strong borrowers.

Which Loan Is Right for You?

A jumbo loan may be the right fit if:

• You are buying a high-priced home in California
  
  
• You have excellent credit and a high income
  
  
• You can comfortably afford a down payment of 20 percent or more
  
  
• You have low overall debt and strong financial reserves
  
  

A conforming conventional loan may be better if:

• Your target home price is within the conforming loan limits
  
  
• You have a moderate or lower income
  
  
• You have a fair to good credit score
  
  
• You do not have significant savings for a large down payment

Final Thoughts: Finding the Right Loan in California

Whether you are considering a jumbo loan or a conforming conventional loan, the right choice depends on your financial situation and your goals. In a high-cost housing market like California, jumbo loans are often essential for purchasing homes above the conforming limits, while conforming loans remain the most affordable choice for moderate-priced homes.

At Equity Capital Home Loans, we help California buyers compare their options and secure the mortgage that best fits their needs.

Thinking about buying a home in California? Contact Equity Capital Home Loans today to explore jumbo and conventional loan options with a lending expert.

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