Understanding Jumbo Home Loans in Houston: 2025 Edition

Houston is known for its diverse housing market, offering everything from affordable starter homes to luxury high-end estates. As the real estate market evolves, so do the mortgage options available to homebuyers. If you’re looking to buy a higher-priced home, it’s essential to understand jumbo mortgages, which cater to properties exceeding the conforming loan limits set by the Federal Housing Finance Agency (FHFA).

In this post, we’ll explore how to navigate these larger mortgages, especially helpful for those interested in low down payment options. We’ll also outline the latest 2025 conforming loan limits for Harris County.

Harris County 2025 Conforming Loan Limits:

Each year, the FHFA sets conforming loan limits for counties across the nation. The 2025 Conforming Loan Limits in Harris County, which includes Houston, is $806,500 for a 1-unit single-family homes. Any mortgage amount in Texas that is above this limit is classified as a “jumbo” loan.

Jumbo loans are designed for borrowers who need larger loan amounts to purchase high-end homes. Unlike conventional loans, jumbo loans are not eligible for backing by Fannie Mae or Freddie Mac, which means they come with different qualification standards and sometimes slightly higher interest rates.

Pros and Cons of Jumbo Loans:

Before deciding on a jumbo loan, it’s important to weigh the benefits and drawbacks.

Pros of Jumbo Loans

Higher Loan Amounts: Jumbo loans allow you to finance luxury homes or high-end properties that exceed the conforming loan limits. Especially useful for buyers purchasing in expensive neighborhoods like Bellaire, Tanglewood, Memorial Villages, River Oaks, etc.
Flexible Property Types: Many jumbo loan lenders provide financing for a variety of properties, including vacation homes, investment properties, and multi-unit residences.
Competitive Interest Rates: While jumbo loans traditionally came with higher interest rates, the gap between jumbo and conforming loan rates has narrowed in recent years.
Customized Terms: Lenders often offer more flexibility in structuring the terms of jumbo loans, allowing for more tailored repayment plans based on borrower needs.

Cons of Jumbo Loans

Stricter Qualification Requirements: Borrowers must meet more stringent standards, including a higher credit score (usually 700 or above), a lower debt-to-income ratio, and a robust financial profile.
Larger Down Payment: Although there are options for lower down payments (see below) many lenders still require a larger down payment compared to conforming loans, often around 20% or more.
Potential for Higher Interest Rates: Although the gap has closed, jumbo loans may still carry slightly higher rates than conforming loans.
Tighter Lending Standards: Since jumbo loans aren’t backed by government-sponsored enterprises, lenders face more risk, so they enforce stricter lending standards, including more thorough documentation and appraisal requirements.

What Are Piggyback Loans and How Can They Help?

Traditionally, borrowers putting down less than 20% would be subject to paying monthly mortgage insurance, or PMI. One popular strategy to avoid paying Private Mortgage Insurance (PMI) on jumbo loans is through a piggyback loan, often referred to as an 80-15-5 or 80-10-10 loan. Using 90% financing as an example, the borrower takes out a first mortgage for 80% of the home’s value, a second mortgage for 10%, and makes a 10% down payment.

How Piggyback Loans Work:

Primary Loan (80%): The borrower secures a primary mortgage for 80% of the home’s value.
Second Loan (10%): A second mortgage (often a home equity loan or home equity line of credit) covers 10% of the purchase price.
Down Payment (10%): The borrower puts down 10% of the home’s purchase price.

The second loan essentially reduces the size of the primary mortgage, often keeping it within conforming loan limits and allowing the borrower to avoid paying PMI and take advantage of lower interest rates. This strategy is beneficial for buyers who can’t afford a 20% down payment but want to bypass the additional cost of PMI.

One drawback of this strategy is slightly higher closing costs since the buyer will be closing on (2) separate mortgages.

5% and 10% Down Payment Jumbo Loans:

Traditionally, jumbo loans required a 20% down payment, but select mortgage companies now offer jumbo loans with lower down payment options. Here’s what you need to know about qualifying for jumbo loans with 5% or 10% down payments:

5% Down Payment Jumbo Loans:

Credit Score: Typically, a higher credit score is required, usually 700 or above.
Loan Limits: Some lenders may cap the total loan amount or impose stricter conditions for 5% down jumbo loans. In most cases, the 95% financing limit in Texas is $1,350,000
Reserve Requirements: Borrowers often need to demonstrate strong financial reserves, such as three to nine months’ worth of mortgage payments in savings or assets. *Reserve requirements can be satisfied with non-liquid retirement accounts.
PMI: Unlike conventional loans, many lenders do not require PMI even if you put down less than 20%.
Property Types: 5% down options are restricted to primary residences properties only.

10% Down Payment Jumbo Loans:

Credit Score: Generally, a credit score of 660 or higher is needed for 10% down jumbo loans.
Loan Limits: The loan cap is generally $2,500,000
Debt-to-Income Ratio: Lenders usually require a debt-to-income ratio (DTI) of 45% or less.
Reserve Requirements: Similar to 5% down options, lenders expect several months’ worth of mortgage payments in reserves.
Property Types: Primary residence or second homes, no investment rental home purchases.

Jumbo loans offer Houston homebuyers the chance to purchase high-end homes in a competitive market. While they come with more stringent requirements, flexible down payment options like 5% and 10% make them more accessible than in the past. For those looking to avoid PMI, piggyback loans can be a valuable strategy, helping buyers secure their dream homes with less upfront cash.

As always, it’s important to consult with mortgage professionals to determine which jumbo loan option best fits your financial situation. Connect with us 7 days a week by calling or just submit the Info Request Form below.