What are the differences between jumbo and conforming loans?

If you’re buying in New York City and plan on getting a mortgage, you’ve probably come across the following terms for loans: jumbo and conforming. Confused about what they are or how they differ? Or which one you might need? 

Jumbo loans, like the name implies, are for larger amounts and have tougher requirements for borrowers. In the past, if you were buying a pricey place here, you likely could not take advantage of the cheaper rates that you get with a conforming loan.

But as loan values for conforming loans have crept up, more NYC buyers are gaining access to conventional, fixed rate-financing. In 2023, the new limit for one-unit properties rose above the $1 million threshold for the first time, “a psychologically important event.” In 2025, it is even higher for expensive areas like NYC.

Here are some of the distinctions between the two types of loan. 

How much can you borrow with a conforming loan?

As with any financial product, factors that affect the risk also affect the rate. Conforming loans often have lower mortgage rates than jumbos and lenders can typically offer more options in terms of term length and whether it is fixed, adjustable or interest only. 

Conforming loans are set by the Federal Housing Finance Agency and this changes annually to reflect rising average prices for housing. For 2025, in high-cost areas like NYC, the new ceiling loan limit for one-unit properties will be $1,209,750, up from $1,149,825 for 2024.

Jumbo loans are bigger and not backed by a government entity

A jumbo loan is bigger than a conforming loan and isn’t backed by any government institutions. Of course, the high cost of housing in NYC means banks and lenders servicing the five boroughs are very familiar with jumbo loans.

If you need to borrow more than $1,209,750 for an apartment in 2025, you’ll need to take out a jumbo loan. 

Because these loans cannot be sold to Fannie Mae, jumbo loans depend on the lender or financial institution for rate, term, and other requirements.

Loan-to-value ratio and other requirements 

The amount of money you can borrow against the sales price of your new apartment or townhouse is called the loan-to-value (LTV) ratio. With a conforming loan, you can borrow up to 95 percent of the cost of an apartment. When you take out a jumbo loan you can only borrow 80 percent of the cost of the apartment.

This is the standard in NYC anyway—the city’s co-ops and condos have their own building requirements that ask you to put down at least 10 percent of the cost of a condo but sometimes more. In a co-op it is often higher, in the range of 20 to 50 percent.

With jumbo loans, lenders may ask that you put up a larger down payment and reduce the LTV ratio to 70-75 percent.

There’s another financial benchmark you’ll have to meet: Banks also require you to have some funds in reserve when you take out a mortgage. The amount varies depending on whether you take out a conforming or a jumbo loan.

Some lenders may require six months of the mortgage payment, interest, taxes, and insurance for a jumbo loan versus the typical two months' worth for a conforming loan.

In terms of the paperwork required, Freddie Mac will accept one year’s tax returns for people who are self-employed and in business for five years, as opposed to a jumbo loan, which requires two years of tax returns.

—This article was updated for December 2024 by Jennifer White Karp.