What Is a Jumbo Loan in Texas? Limits & Requirements

A jumbo loan represents a category of mortgage financing that surpasses the standard loan limits set by government-sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac. When a mortgage amount exceeds the thresholds established by the Federal Housing Finance Agency (FHFA), it is classified as a non-conforming loan.

Because these larger loans are not eligible for purchase by Fannie Mae or Freddie Mac, lenders retain the full risk associated with them. This higher risk profile necessitates a different approach to underwriting and typically results in more stringent qualification criteria. Consequently, borrowers seeking a jumbo loan can expect to encounter a distinct set of requirements compared to those applying for a conventional, conforming mortgage.

Defining Jumbo Loans in Texas

In Texas, a jumbo loan is specifically defined by its dollar amount, which exceeds the conforming loan limits established annually by the Federal Housing Finance Agency (FHFA). For most counties across the United States, including the vast majority of Texas counties, the standard conforming loan limit for a single-unit property was $766,550 in 2024. Any loan amount sought that surpasses this figure in Texas is generally categorized as a jumbo loan.

While some high-cost areas in other parts of the country may have higher conforming limits, most of Texas adheres to this standard baseline. Therefore, for a Texas homebuyer, this $766,550 threshold serves as the primary determinant for identifying a jumbo loan. These limits are subject to annual review and adjustment by the FHFA, reflecting changes in average U.S. home prices. For example, the baseline conforming loan limit for a single-unit property increased to $806,500 for 2025.

Distinctive Aspects of Jumbo Loan Qualification

Qualifying for a jumbo loan involves more rigorous underwriting standards due to the increased financial risk for lenders.

A higher credit score is generally expected, often requiring a FICO score of 700 or above, with some lenders preferring 740 or higher to secure favorable terms. Lenders also look for lower debt-to-income (DTI) ratios, commonly requiring it to be below 43%, and sometimes even as low as 38%, to ensure the borrower can comfortably manage the substantial monthly payments. A larger down payment is another common requirement, typically ranging from 10% to 20% or more of the home’s purchase price, which helps mitigate lender risk.

Furthermore, applicants must often demonstrate significant liquid cash reserves after closing, frequently equivalent to six to twelve months of mortgage payments. The appraisal process for jumbo loans can also be more stringent, occasionally involving two independent appraisals for higher-value properties to confirm the home’s market value. Additionally, lenders typically demand more extensive documentation of income, assets, and employment history to thoroughly assess the borrower’s financial capacity.

Navigating Texas-Specific Considerations for Large Mortgages

Texas presents unique legal and market considerations for securing large mortgages. The state’s strong constitutional protections for homesteads significantly influence lender risk assessment. Texas homestead laws generally protect a primary residence from forced sale by most creditors, with only specific types of liens, such as purchase money mortgages, being enforceable.

This constitutional framework can create a non-recourse environment for purchase money loans on primary residences, meaning that in the event of foreclosure, lenders may be limited in their ability to pursue a deficiency judgment against the borrower for any remaining balance.

Another significant factor is Texas’s property tax environment. The state does not levy a personal income tax, which means local governments rely heavily on property taxes to fund public services. As a result, average effective property tax rates in Texas are generally higher than the national average, often ranging from 1.63% to 1.8% compared to a national average of approximately 0.90%. These higher property taxes can substantially increase the total monthly housing cost for expensive homes, directly impacting a jumbo loan applicant’s debt-to-income calculations and overall affordability.

The Texas real estate market for high-value properties is characterized by robust demand, particularly in major metropolitan areas, driven by consistent population growth and a strong economy. This competitive market can influence property valuations and the speed at which high-value homes are transacted. While not a direct legal requirement, these market dynamics can indirectly affect the jumbo loan process by influencing appraisal outcomes and the overall perceived risk of the property.