Compare Current Jumbo Mortgage Rates

U.S. News Expert Insights

“Mortgage rates retreated further this week as incoming data on inflation and the labor market continues to point to a cooling economy. In its December meeting, the Federal Reserve elected to hold the federal funds rate at 5.25% to 5.5%, where it’s been since July. It appears that the Fed’s rate-hike cycle has likely come to an end, so now investors have turned their attention to when rate cuts might come next year.

“Although mortgage rates seem to have peaked, prospective homebuyers should still temper their expectations. The rate on a 30-year fixed mortgage isn’t likely to return to record-low territory anytime soon, if ever again: Most forecasters believe that rates will stay above 6% throughout 2024. As long as the economy keeps humming along at a steady pace, rates will stay elevated. But considering that rates were nearly 8% just over a month ago, it’s evident that housing affordability is on the right track.”

– Erika Giovanetti, U.S. News Loans Expert

A jumbo mortgage is a home loan that exceeds conforming limits set by the Federal Housing Finance Agency. The FHFA oversees Fannie Mae and Freddie Mac, which buy and sell conforming home loans on the secondary market.

“Jumbo mortgages don’t get sold to Fannie or Freddie,” says Melissa Cohn, regional vice president of William Raveis Mortgage. “Many of them are portfolio loans, meaning banks keep them on their balance sheets.”

Because lenders tend to carry these mortgages and borrowers are more likely to default on larger balances, jumbo loans are riskier for lenders.

“Say you have a $2 million jumbo loan versus 10 conforming loans each worth $200,000,” Cohn says. “If one of those 10 conforming loans goes bad, you still have nine that are performing. If the one jumbo loan goes bad, it all goes down.”

So to reduce risk, lenders set higher qualification standards on jumbo mortgages. You’ll generally need a higher credit score, larger down payment and a lower debt-to-income, DTI, ratio to get a jumbo loan.

Conventional loans generally refer to mortgages that follow conforming guidelines, while jumbo loans exceed conforming limits.

The best mortgage for you depends on what you qualify for and the amount you need to borrow. Here are some of the major differences between jumbo and conventional mortgages:

Jumbo loan interest rates are usually higher than rates on conforming loans, but they can dip below conforming rates on occasion. They vary at every financial institution.

To set jumbo loan rates, a lender first looks at the cost of funds, which is the interest rate it pays when it borrows from another bank. Then the lender adds its own margin to the cost of funds.

“When you add the cost of funds to the margin, that will give you your jumbo mortgage rate,” says Ray Rodriguez, a regional mortgage sales manager with TD Bank. “Rates vary because each bank could have a different risk appetite and profitability model. It all depends on the individual lender.”

Fixed jumbo loan terms can vary between 10 and 30 years. Some lenders offer other options, such as adjustable-rate mortgages, or ARMs. A 5/1 ARM, for instance, starts with a low interest rate for the first five years. During this time, “the mortgage walks, talks, acts and feels like a 30-year fixed rate loan,” Cohn says.

After the fixed period ends, the rate can change at set intervals for the remaining loan term. Cohn says borrowers often choose ARMs when market rates are high. They’ll typically refinance to a fixed rate later on, which provides predictable payments.

To calculate your jumbo loan interest rate, contact a lender and ask for a quote. You’ll need to provide details about your credit, income, outstanding debts, estimated loan size and down payment.

The lender can provide a rate quote and estimate your monthly payment. If you already got a rate quote, you can use a mortgage calculator to estimate your monthly payment. This can help you determine whether the jumbo loan fits into your budget.

Comparing loan rates is one of the best ways to lower your costs when buying a home. “Rates with jumbo mortgages can vary broadly from bank to bank,” Cohn says, because lenders have more wiggle room to set loan terms.

Even a small rate difference can provide significant savings especially on a high-dollar loan. Let’s say you take out a 30-year fixed-rate jumbo mortgage for $1 million and put down 20%. You’d save $134 a month with a 6.75% interest rate compared to 7%. And over the life of the loan, you’d save more than $48,000.

To compare rates, start by contacting multiple banks and credit unions, and ask these questions:

A jumbo loan could be a good idea if you’re buying a high-value home and the larger monthly payments won’t strain your finances. First check the conforming loan limits for the county where you’re looking for homes. Loan limits can vary by county and the number of units in the property. You’ll need to take out a jumbo loan if the home you’re buying is priced above the conforming limit in your county.

The loan limit applies to the amount you’re borrowing – not necessarily the sale price of the home. Say the loan limit is $726,200 in your area, and you’re buying a one-unit property for $800,000. With a 20% down payment of $160,000, you’re only borrowing $640,000 from the lender.

In this scenario, you can apply for a conforming loan. It’s generally easier to qualify for a conforming loan, so this can work in your favor.