Jumbo Loans vs. Conforming: I Compared Both for My $825K Home Purchase and Here's What I Learned

When I started house hunting in Orange County, California in early 2024, I quickly learned that $825,000 was the baseline for single-family homes in decent neighborhoods.

My first question: Is that a jumbo loan or conforming loan?

The answer: In Orange County, the 2024 conforming loan limit is $1,089,300—so my $825,000 purchase qualified as conforming, not jumbo.

Understanding the 2024 Conforming Loan Limits

Standard vs. High-Cost Area Limits

Standard conforming limit (2024): $766,550 in most U.S. counties

High-cost area conforming limit (2024): Up to $1,149,825 in the most expensive counties

How high-cost limits are calculated: 150% of the standard conforming limit in expensive markets where median home prices exceed baseline by significant margins.

Counties with higher conforming limits include:

• Los Angeles County, CA: $1,149,825
• Orange County, CA: $1,089,300
• San Francisco Bay Area, CA: $1,149,825
• New York City area, NY: $970,800
• Washington, DC area: $970,800
• Seattle-Bellevue, WA: $1,089,300
• Denver, CO: $822,375
• Plus many others

Why this matters: A $900,000 loan is conforming in Orange County (saves 0.25-0.50% on rate) but jumbo in Dallas (pays 0.25-0.50% premium).

What “Conforming” Actually Means

Conforming loans:

• Follow Fannie Mae/Freddie Mac underwriting guidelines
• Can be purchased by government-sponsored enterprises (GSEs)
• Lenders have less risk because they can sell loans to Fannie/Freddie
• Therefore: Lower rates for borrowers

Non-conforming (jumbo) loans:

• Exceed Fannie Mae/Freddie Mac loan limits
• Cannot be sold to GSEs
• Lenders must hold loans in portfolio or sell to private investors
• Higher risk for lenders
• Therefore: Higher rates for borrowers (typically 0.25-0.75% premium)

My $825K Home Purchase: Conforming Loan in High-Cost Orange County

My Qualifications

Purchase price: $825,000 (Orange County, CA)

Loan type: High-balance conforming (under $1,089,300 Orange County limit)

My financial profile:

• Income: $165,000/year ($13,750/month gross)
• Credit score: 732 (middle score)
• Down payment: 10% ($82,500)
• Savings after down payment: $35,000 (about 5 months reserves)
• Debt: $780/month (car payment $420, student loan $285, credit cards $75)

Conforming Loan Terms I Received

Loan details:

• Purchase price: $825,000
• Down payment (10%): $82,500
• Loan amount: $742,500 (under conforming limit)
• Interest rate: 7.00%
• Loan term: 30 years fixed
• Monthly P&I: $4,940
• PMI: $310/month (0.50% annually on loan amount, drops at 80% LTV)
• Property taxes: $720/month
• Insurance: $165/month
• Total monthly payment: $6,135

Debt-to-income ratio:

• Monthly gross income: $13,750
• Total monthly obligations: $6,135 housing + $780 debt = $6,915
• DTI: 50.3%

Wait, 50% DTI? How did I qualify?

High-balance conforming loans (between $766,550 and $1,089,300) allow up to 50% DTI with compensating factors:

• Credit score 720+ (I had 732)
• 3+ months reserves (I had 5 months)
• Stable 3+ year employment (I had 4 years same employer)
• Low down payment (10%) offset by strong credit and reserves

What If I’d Needed a Jumbo Loan Instead?

To understand jumbo loan costs, I modeled the same scenario if I lived in a state with standard $766,550 conforming limit.

Hypothetical jumbo loan for $825K home in standard-limit county:

• Purchase price: $825,000
• Down payment (15% required for jumbo): $123,750
• Loan amount: $701,250
• Interest rate: 7.375% (jumbo premium of 0.375%)
• Monthly P&I: $4,861
• No PMI (jumbo loans with 15%+ down don’t require PMI)
• Property taxes: $720/month
• Insurance: $165/month
• Total monthly payment: $5,746

Comparing conforming vs. jumbo:

Key insights:

1. Jumbo required $41,250 more down payment (15% vs. 10%)—money I didn’t have
2. Jumbo had no PMI but higher rate offset savings
3. Jumbo had lower total payment ($5,746 vs. $6,135) due to smaller loan amount
4. Jumbo required deeper reserves (6-12 months vs. 3-6 months)—I had only 5 months

Bottom line: Even though jumbo monthly payment was lower, I couldn’t qualify because:

• I didn’t have $123,750 for 15% down (only had $82,500)
• I didn’t have 6-12 months reserves (only had 5 months, barely met conforming minimum)

Being in high-cost Orange County saved me—I qualified as conforming with 10% down.

Rate Comparison: Conforming vs. Jumbo at Different Price Points

Scenario 1: $700,000 Purchase (Under Standard Conforming Limit)

Conforming loan (available everywhere):

• Down payment (5%): $35,000
• Loan amount: $665,000
• Rate: 6.875%
• Monthly P&I: $4,371
• PMI: $277/month (0.50% annually)
• Total P&I + PMI: $4,648

Analysis: This is conforming nationwide. Best rates, low down payment, accessible to most qualified buyers with 620+ credit.

Scenario 2: $825,000 Purchase

Option A: High-cost county (Orange County, Seattle, etc.)—CONFORMING

• Down payment (10%): $82,500
• Loan amount: $742,500
• Rate: 7.00%
• Monthly P&I: $4,940
• PMI: $310/month
• Total P&I + PMI: $5,250

Option B: Standard-limit county (Dallas, Phoenix, etc.)—JUMBO

• Down payment (15%): $123,750
• Loan amount: $701,250
• Rate: 7.375%
• Monthly P&I: $4,861
• PMI: $0
• Total P&I + PMI: $4,861

Difference: High-cost conforming costs $389/month more but requires $41,250 less down payment.

Break-even: $41,250 ÷ $389/month = 106 months (8.8 years) to break even on the extra down payment.

Scenario 3: $1.2M Purchase

Option A: High-cost county (LA, SF, NYC)—CONFORMING

• Down payment (15%): $180,000
• Loan amount: $1,020,000 (under $1,149,825 limit in LA/SF)
• Rate: 7.125%
• Monthly P&I: $6,919
• PMI: $425/month (0.50% annually on conforming)
• Total P&I + PMI: $7,344

Option B: Standard-limit county—JUMBO

• Down payment (20%): $240,000
• Loan amount: $960,000
• Rate: 7.375%
• Monthly P&I: $6,657
• PMI: $0
• Total P&I + PMI: $6,657

Difference: High-cost conforming costs $687/month more but requires $60,000 less down payment.

Break-even: $60,000 ÷ $687/month = 87 months (7.3 years)

Scenario 4: $2M+ Purchase (Jumbo Everywhere)

No conforming option available—jumbo required nationwide:

• Down payment (20%): $400,000+
• Loan amount: $1,600,000+
• Rate: 7.25-7.50%
• Monthly P&I: $10,900+
• PMI: $0
• Reserves: 12 months minimum ($160,000+ liquid after closing)

At this price point, loan limits don’t matter—you’re in jumbo territory everywhere.

High-Balance Conforming: The Sweet Spot or Trap?

Benefits of High-Balance Conforming

1. Lower down payment requirements

I qualified with 10% down ($82,500) vs. 15-20% required for jumbo ($123,750-$165,000).

2. Lower credit score requirements

High-balance conforming accepts 620-640+ credit (depending on down payment and compensating factors) vs. 700-720+ for jumbo.

3. Higher DTI allowances

I qualified at 50.3% DTI due to strong compensating factors—jumbo lenders typically cap at 43-45% DTI.

4. More lender options

Most conventional lenders offer high-balance conforming—but fewer lenders offer true jumbo products.

5. Lower rates than jumbo

7.00% conforming vs. 7.375% jumbo in my scenario—0.375% savings.

Downsides of High-Balance Conforming

1. PMI required under 20% down

I’m paying $310/month PMI ($3,720/year) until I hit 80% LTV.

2. Rates higher than standard conforming

High-balance conforming (7.00%) was 0.125% higher than standard conforming loans under $766,550 (6.875%).

3. Stricter scrutiny than standard conforming

Underwriters treated my high-balance conforming loan almost like jumbo—requiring extensive documentation, verification, and reserves.

4. Limited to expensive markets

If I moved to Dallas or Phoenix, I’d need to refinance to jumbo (wouldn’t transfer as conforming).

My PMI Elimination Strategy

Current situation:

• Home value: $825,000 (original purchase)
• Loan balance: $742,500 (original)
• Current LTV: 90%
• PMI: $310/month ($3,720/year)

PMI drops automatically when I hit 78% LTV (pay down to $643,500 balance or home appreciates to $952,564).

Option 1: Wait for appreciation

If my home appreciates 4% annually, it’ll be worth $970,000 in 4 years.

At $970,000 value with $710,000 balance (after 4 years paydown), my LTV = 73.2%—PMI drops automatically.

Cost of waiting: $310 × 48 months = $14,880 PMI paid over 4 years

Option 2: Prepay principal to 78% LTV

To hit 78% LTV immediately, I’d need to pay down loan to $643,500 (78% of $825,000).

Required principal prepayment: $742,500 - $643,500 = $99,000

I don’t have $99,000 to prepay, so this isn’t realistic.

Option 3: Request PMI removal at 80% LTV after appreciation + paydown

Once home appreciates to $875,000 (6% increase over 2 years) and loan pays down to $722,000, my LTV = 82.5%.

I can pay extra $20,000 to get to 80% LTV ($700,000 balance) and request PMI removal.

Cost: 2 years PMI ($310 × 24 = $7,440) + $20,000 prepayment

Savings: Eliminate PMI 2 years early (save $7,440)

My plan: Wait 2 years for appreciation to $875,000, prepay $20,000 principal, request PMI removal at 80% LTV. Total cost: $7,440 PMI + $20,000 prepay = $27,440 to eliminate $310/month PMI.

When to Choose Conforming vs. Jumbo

Choose Conforming (Standard or High-Balance) If:

✅ Purchase price under conforming limit for your county
✅ You have limited down payment (5-15% available)
✅ Your credit score is 640-720 (harder to get jumbo at this tier)
✅ Your reserves are limited (under 6 months liquid assets)
✅ You want lower rate (conforming rates 0.25-0.50% better than jumbo)

Jumbo Makes Sense If:

✅ Purchase price exceeds conforming limit (no choice)
✅ You have 20%+ down payment (avoids PMI)
✅ Your credit score is 740+ (best jumbo pricing)
✅ You have 12+ months reserves (meets jumbo requirements)
✅ You prefer no PMI vs. lower down payment with PMI

The Gray Area: $800K-$1.1M in High-Cost Counties

This is where location determines everything.

In Orange County, Seattle, or NYC area: Your $900,000 loan is conforming (better rates, lower down payment).

In Dallas, Phoenix, or Atlanta: Your $900,000 loan is jumbo (higher rates, higher down payment requirements).

Same home, different financing costs—purely based on geography.

The Bottom Line

My $825,000 purchase in Orange County qualified as high-balance conforming—saving me compared to jumbo financing:

• Down payment: $82,500 (10%) vs. $123,750 (15% jumbo)—saved $41,250 upfront
• Rate: 7.00% conforming vs. 7.375% jumbo—saved 0.375%
• Qualification: 50% DTI accepted vs. 43% jumbo max—I wouldn’t have qualified for jumbo

But I’m paying PMI: $310/month until I hit 80% LTV (2-4 years away)

My advice:

If You’re in a High-Cost County:

✅ Verify your conforming limit before assuming you need jumbo—check at Browse Lenders
✅ Maximize conforming financing if you qualify (better rates, lower down payment)
✅ Plan PMI elimination once you hit 20% equity (2-4 years typically)

If You’re in a Standard-Limit County:

✅ Understand you’ll need jumbo for purchases over $766,550
✅ Prepare 15-20% down payment and 6-12 months reserves
✅ Optimize your credit score to 740+ for best jumbo rates
✅ Consider cash-out refinance on current home to fund jumbo down payment

Location matters as much as loan amount when determining conforming vs. jumbo financing.

Connect with loan specialists who understand your county’s conforming limits and can structure optimal financing for your purchase price.

For me, being in Orange County made the difference between qualifying (conforming) and not qualifying (would’ve needed jumbo with higher down payment I didn’t have).