Can You Get a Jumbo Loan With 5 Percent Down?

A jumbo loan represents a mortgage that exceeds the conforming loan limits established by Fannie Mae and Freddie Mac. For 2025, the standard conforming loan limit for a one-unit property in most areas of the United States is $806,500, though this limit can extend up to $1,209,750 in designated high-cost regions. While securing a jumbo loan traditionally involves a substantial down payment, it is possible to obtain one with a 5% down payment. This option, however, comes with more stringent qualification requirements and generally higher associated costs.

The Landscape of Low Down Payment Jumbo Loans

A 5% down payment on a jumbo loan is considered low because it results in a high Loan-to-Value (LTV) ratio, typically 95%. This elevated LTV presents an increased risk for lenders, primarily because jumbo loans are not eligible for purchase by government-sponsored enterprises like Fannie Mae or Freddie Mac. Lenders bear any potential losses if a borrower defaults or the property value declines. This higher risk profile explains why low down payment jumbo loans are considered niche products within the mortgage market.

Only a limited number of financial institutions offer these loans, as they must maintain stricter internal underwriting guidelines compared to those for conforming loans. While a 5% down payment might seem appealing, it fundamentally shifts more risk onto the lender, leading to specific requirements designed to mitigate that risk.

Qualifying for a Low Down Payment Jumbo Loan

To qualify for a low down payment jumbo loan, lenders impose strict criteria. Borrowers need a high credit score, often in the range of 700 to 720 or higher, though some lenders may require scores of 740 or more, especially for lower down payment options. While a few lenders might consider scores as low as 660 or 680, these typically come with less favorable interest rates.

Another critical factor is the debt-to-income (DTI) ratio, which lenders keep under tight control for jumbo loans. Lenders typically seek DTI ratios below 43%, with an ideal range often falling around 36% or even lower. The DTI ratio is calculated by dividing total monthly debt payments, including the prospective new mortgage payment, by the borrower’s gross monthly income. This strict limit ensures the borrower has sufficient disposable income to comfortably manage the higher monthly payments associated with a large loan.

Lenders also require significant liquid cash reserves to be held after closing, typically ranging from 6 to 24 months of the new mortgage payments, which include principal, interest, taxes, and insurance (PITI). These reserves must be verifiable and can include funds held in checking, savings, money market accounts, or certain retirement and investment accounts.

Certain property types or locations may face higher scrutiny or be ineligible for low down payment jumbo loans. For instance, some lenders might have stricter guidelines for investment properties or multi-unit dwellings compared to primary residences. Conversely, these low down payment options might be more prevalent in high-cost housing markets where jumbo financing is a necessity.

Lenders demand a stable employment history and comprehensive income verification. Borrowers need to provide at least two years of tax returns, W-2s, and recent pay stubs to demonstrate consistent income. Self-employed individuals may need to provide additional documentation, such as bank statements, to verify their income and financial stability.

Financial Implications of Low Down Payment Jumbo Loans

Obtaining a jumbo loan with a low down payment often means accepting higher interest rates. Due to the increased risk associated with a high loan-to-value ratio and the loan not being sold to government-backed entities, lenders typically charge a premium. While the interest rate gap between jumbo and conforming loans can fluctuate, the added risk generally translates into a higher borrowing cost over the life of the loan.

Private Mortgage Insurance (PMI) is almost always a requirement for jumbo loans with less than a 20% down payment, as the loan-to-value ratio exceeds 80%. PMI represents an additional monthly expense, calculated as a percentage of the loan amount, which can be substantial given the large sums involved in jumbo financing. This insurance protects the lender in case of borrower default, but its cost is borne by the homeowner.

Borrowers typically have a few options for paying PMI, including monthly premiums, a single upfront premium paid at closing, or lender-paid PMI (LPMI). LPMI generally results in a slightly higher interest rate on the loan, but it eliminates the separate monthly PMI payment.

Beyond interest and PMI, standard closing costs apply and can be significant due to the larger loan amounts. These costs typically range from 3% to 6% of the total loan amount and include various fees such as origination charges, appraisal fees, and title insurance. In some cases, lenders may also require two appraisals for a jumbo loan, adding to the upfront expenses.

The specialized nature of low down payment jumbo loans also means fewer lenders offer these products. This limited availability can restrict a borrower’s ability to shop around extensively for the most competitive rates and terms. Working with a mortgage broker who has connections to non-qualified mortgage (non-QM) lenders might be beneficial in exploring available options.