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When it comes to securing a mortgage, borrowers with a 720 FICO score are in a strong position. However, loan type still plays a critical role in determining overall cost. Two common choices are conventional conforming loans and high-balance loans, especially in high-cost housing markets. But how do these options stack up over a five-year span?
In this article, we’ll explore the key differences between conventional and high-balance loans, provide a side-by-side five-year cost breakdown, and offer guidance on which loan may be right for you.
What is a High-Balance Loan?
A high-balance loan, also known as a conforming jumbo loan, exceeds the standard conforming loan limits set by the Federal Housing Finance Agency (FHFA) but still falls within the higher limits allowed in certain high-cost areas.
For 2025, the baseline conforming loan limit is $766,550, but in high-cost areas, this limit can go up to $1,149,825. Any loan amount between those two values is considered high-balance.
Learn more about conforming loan limits in your county
Conventional vs High-Balance Loan: Key Differences
| Feature | Conventional Loan | High-Balance Loan |
| Loan Limits | Up to $766,550 | $766,551 to $1,149,825 |
| Interest Rates | Lower | Slightly higher |
| PMI | Typically lower | Typically higher |
| Availability | Nationwide | Only in high-cost areas |
| Underwriting | Standard guidelines | More stringent |
Five-Year Cost Comparison at 720 FICO
To provide a realistic comparison, we’ll analyze two scenarios:
- Conventional Loan: $750,000 home, $700,000 loan
- High-Balance Loan: $850,000 home, $800,000 loan
Assumptions:
- 720 FICO score
- 10% down payment
- 30-year fixed mortgage
- Market rates as of mid-2025:
- Conventional: 6.50% interest
- High-Balance: 6.75% interest
- Conventional: 6.50% interest
- PMI at 0.3% for conventional, 0.4% for high-balance
- Taxes, insurance, and maintenance not included
Five-Year Cost Breakdown
| Cost Component | Conventional Loan | High-Balance Loan |
| Monthly Principal & Interest | $4,421 | $5,189 |
| Monthly PMI | $175 | $267 |
| Total Payments (5 years) | $275,760 | $326,760 |
| PMI Total (5 years) | $10,500 | $16,020 |
| Total 5-Year Cost | $286,260 | $342,780 |
As shown, a high-balance loan can cost over $56,000 more in five years, even with a strong credit profile like 720 FICO.
Which Loan Is Right for You?
If you’re purchasing a home in a high-cost area and your loan amount exceeds the standard conforming limit, a high-balance loan may be necessary. However, if you can keep your loan under the $766,550 limit through a higher down payment, you may save significantly over time.
Tip: Consider working with a mortgage broker to explore customized rate quotes for both options.
FAQs
What’s the minimum credit score for a high-balance loan?
Most lenders require at least a 620 FICO, but a 720+ score qualifies for better rates and lower PMI.
Are high-balance loans harder to qualify for?
They typically require stricter underwriting and higher reserves due to the larger loan amounts.
Can I avoid PMI on a high-balance loan?
Yes, by putting down 20% or more, you can usually eliminate PMI—even on high-balance loans.
Read Next
- Conventional vs VA Loans: Which is better?
- Jumbo Loans vs. Conventional Loans: Making the Right Choice
Get Expert Financing
- Matched with investor-friendly lenders
- Fast pre-approvals-no W2s required
- Financing options fro rentals, BRRRR, STRs
- Scale your portfolio with confidence
Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.
