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Home buyers in the Los Angeles metro area often have to rely on jumbo loans due to high home prices within the local real estate market.
A jumbo loan is one that exceeds certain government-imposed size restrictions. Because of their size, these “oversized” mortgages often have stricter criteria for borrowers.
Summary: This guide explains how jumbo loans in Los Angeles work, why they’re so common in the Los Angeles area, and everything else a home buyer needs to know.
Let’s start with a quick lesson in mortgage terminology, relevant to this topic. More specifically, let’s compare jumbo vs conforming loans to help you differentiate between the two.
A conforming loan is one that meets the size limits used by Fannie Mae and Freddie Mac, government-sponsored corporations that buy mortgage loans from lenders. These “conforming” size limits can vary by county because they’re based on local home values.
A jumbo loan is one that exceeds the conforming limits mentioned above. Since they cannot be sold to Freddie Mac or Fannie Mae, these loans carry more risk for lenders and bring stricter qualification requirements for borrowers.
Example: The 2025 conforming loan limit for Los Angeles County is $1,209,750. So borrowing more than that amount would likely require the use of a jumbo loan.
For reasons you can probably guess, jumbo loans are a common mortgage option in the Los Angeles area.
Housing markets that have relatively high home prices also have a higher percentage of borrowers who use jumbo loans. The reason is that you need a higher level of Los Angeles home financing to purchase a more expensive home.
The median home price for the Los Angeles-Long Beach-Anaheim Metropolitan area is currently well over $900,000, and will likely surpass $1 million by 2026.
And while Los Angeles has the highest possible loan limits allowable, there are still many homes in the area with prices that far exceed those limits.
The same can be said for nearly all coastal cities and metros in California, from San Diego to San Francisco and all points in between.
When compared to conforming loans, jumbo loans often require higher credit scores, bigger down payments, and higher income levels.
These jumbo mortgage requirements help to ensure that the borrower is financially capable of taking on such a large loan, based on their current income and credit situation.
In Los Angeles, many mortgage lenders require a jumbo loan down payment of at least 20% to minimize their risk. But that’s not set in stone. In some cases, exceptions can be made for borrowers with excellent credit or other offsetting factors.
There’s a widespread notion that jumbo loans always have significantly higher mortgage rates when compared to their smaller conforming loan counterparts.
But that’s not always true.
Generally speaking, jumbo loans in Los Angeles can have slightly higher interest rates compared to conforming loans. But the spread or difference between them has narrowed in recent years.
When this article was published in April 2025, Los Angeles mortgage rates for conforming loans are currently averaging 6.72% according to the Mortgage Bankers Association. The average rate for jumbo loans during that same week was 6.78%, a difference hardly worth mentioning.
Borrowers should also remember that actual mortgage rates can vary due to a number of factors, including the borrower’s credit score and down payment amount.
Jumbo loans come in a variety of terms and repayment schedules, and they can either have a fixed or adjustable rate.
As you might already know, a fixed-rate jumbo mortgage will carry the same interest rate for as long as the borrower keeps it. This offers long-term predictability and stability, making it easier to budget and plan for the future.
An adjustable-rate jumbo mortgage loan (or “ARM”) has a rate that can adjust once per year, usually after a fixed-rate stage that lasts for several years.
Some borrowers in the Los Angeles area use the ARM version because they typically come with a lower mortgage rate during the first one to seven years. Later, the homeowner could refinance the loan or sell the house to avoid the annual rate adjustments.
The takeaway: Los Angeles jumbo loans offer a higher level of financing for high-end homes, while allowing you to choose your interest rate structure.
As mentioned earlier, a jumbo loan is a mortgage that exceeds the conforming size limits used by Fannie Mae and Freddie Mac.
These limits can change from one year to the next, due to rising home prices. Toward the end of each year, federal housing officials review home price trends to determine whether or not they need to increase the jumbo loan limits in LA, and by how much.
If you’re planning to buy an expensive home in Los Angeles and need high-value home financing, find the loan limits for (A) the current calendar year and (B) the county where you are buying.
While jumbo loans provide an excellent way to finance high-value homes, they come with several risks and challenges that prospective borrowers should be aware of before committing to one.
Stricter Qualification Requirements: Compared to conforming loans, jumbo loans have more stringent qualification criteria. Lenders typically require a higher credit score, often above 700, to approve a borrower for a jumbo loan. This ensures the borrower has a strong financial history and is capable of handling large amounts of debt. Lenders may also require a larger down payment, often 20% or more, which can be a barrier for some buyers.
Higher Interest Rates: Although jumbo loan rates have become more competitive in recent years, they are generally still higher than those for conforming loans. A slightly higher interest rate might seem negligible, but over the life of the loan, it can add up significantly, resulting in higher monthly payments and overall interest costs.
Large Debt Burden: The size of a jumbo loan often means a larger monthly payment, which could strain a borrower’s budget. For high-value homes in Los Angeles, even small fluctuations in interest rates can lead to a significant increase in monthly payments. Homebuyers must ensure they are financially prepared to handle these payments, particularly if their income fluctuates.
Limited Availability: Jumbo loans are not available through government-backed entities like Fannie Mae or Freddie Mac, so lenders may have stricter requirements or more limited loan programs. Additionally, some lenders may impose more stringent conditions, such as requiring more reserves or a lower debt-to-income ratio.
Risk of Repossession: Like all loans, jumbo loans come with the risk of foreclosure if the borrower fails to repay the loan. This risk is especially concerning given the large loan amounts involved, which can put a substantial strain on the borrower’s financial future if they encounter hardship.
Jumbo loans aren’t the only option for Los Angeles home buyers purchasing high-end properties. Some borrowers use a “piggyback” strategy instead, by combining two loans.
The 80-10-10 is one of the most common examples of this method.
The 80-10-10 piggyback mortgage strategy in Los Angeles splits your home financing into two loans plus a cash down payment. With this approach, the first loan covers 80% of the home’s purchase price, a second loan covers 10%, and you provide a 10% down payment.
For some borrowers, this can be a better option than taking out a jumbo loan. Jumbo loans typically have stricter requirements, higher interest rates, and larger down payment demands.
By keeping the first mortgage within the conforming loan limits through the piggyback strategy, you may benefit from lower rates and more flexible credit requirements, making home financing more accessible and cost-effective.
If you’re looking to buy in Los Angeles, CA, we can help. At Sammamish Mortgage, we offer various mortgage options for you to choose from. Visit our website to get an instant rate quote or call us today to have your mortgage questions answered!
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.