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I live in an area of the United States where it would be very difficult to get a home for less than the $417,000 conforming loan limit. Unfortunately, jumbo loans seem to have a hard 20% downpayment requirement and higher interest rates (around half a percentage point higher, from what I've seen) than conforming loans.

But one thing I haven't been able to clarify is whether the $417k limit is on the price of the home or the amount to be borrowed. In other words, if the home is $450k and I put down $45k, the size of the loan is only $405k. Do I then have a conforming loan (because the amount to be borrowed is lower than $417k), or a jumbo loan (because the price of the property exceeds $417k)?

If it's the former, then is it always possible to avoid getting a jumbo by simply putting enough money down so that the loan amount falls below the limit, turning that loan into a conforming loan?

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The loan is the loan, the down payment is not part of the loan. The principle amount owed on the loan at the beginning of the loan is the amount of the loan.

If your loan amount is $390,000 then that's below the "jumbo" classification. Your down payment is irrelevant.

Lenders may want or require 20% (or any other amount) down so the loan will meet certain "loan to value" ratio requirements. In the case of real estate the lenders in general want a 20% down side cushion before you're "upside down" (owe more than the home is worth). This is not unique to homes and is common in many secured lending instruments; like cars for example.

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  • +1 and I appreciate your patience. Thank you for adding this here, no need to keep that duplicate open.
    – JTP - Apologise to Monica ♦
    May 11, 2016 at 11:58
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In the United States a Jumbo Loan is one in which the loan amounts exceeds a set value. For much of the US it is currently $417,000 but it is higher in some areas. It is set by the US government and is adjusted each year.

If you are trying to avoid the Jumbo designation then putting more down makes that possible. Generally the Jumbo loans have a higher rate. My credit union does allow jumbo loans with less than 20% down, but I am not sure if they are in the majority or the minority regarding down payment requirements.

Keep in Mind that once the house price goes above Jumbo/0.8 or $521,250 you will be putting down more than 20% to avoid the Jumbo designation.

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