To get a million-dollar loan, you first need to know which kind you’re asking for. If the money is buying a home, you’re applying for a jumbo mortgage, meaning any residential loan above the 2026 conforming limit of $832,750 in most markets and $1,249,125 in high-cost areas like parts of California, New York, and Hawaii.1Federal Housing Finance Agency. FHFA Announces Conforming Loan Limit Values for 2026 If the money is for a business, commercial real estate, or equipment, you’re looking at a conventional commercial loan or an SBA-backed program. Either way, plan on a credit score in the 700s, 20 percent or more down, several months of payments in reserve, two years of tax returns and business financials, and a process that runs 30 to 90 days from application to closing.
Which Loan You’re Actually Applying For
Jumbo mortgages sit outside the conforming market, so lenders keep them on their own books and set their own approval rules. That’s why the standards run tighter than a conventional mortgage across credit, down payment, and reserves.
On the commercial side, the SBA 7(a) program allows loans up to $5 million, with the SBA guaranteeing up to 75 percent of the loan amount for loans over $150,000.2U.S. Small Business Administration. Terms, Conditions, and Eligibility The SBA 504 program, built for major fixed assets like commercial property, goes up to $5.5 million.3U.S. Small Business Administration. 504 Loans Both usually come with lower down payments and longer repayment terms than conventional commercial financing, so they’re worth pricing out if your business qualifies.
Credit, Income, and DTI
Most jumbo lenders want a credit score of at least 700, with the best rates reserved for 740 and up. Approvals in the upper 600s happen, but the rate premium is noticeable. Commercial lenders look at similar personal credit thresholds but weight business financials more heavily.
Income has to be stable and verifiable over at least two years. Salaried applicants show W-2s and pay stubs. Self-employed borrowers and business owners show two full years of tax returns with sufficient net income. Business applicants generally need at least two years of operating history, and many lenders want annual revenue equal to roughly one-third of the requested loan amount. For a million-dollar business loan, that’s around $330,000 or more in annual gross receipts.
Debt-to-income ratio still matters even though the Consumer Financial Protection Bureau removed its hard 43 percent DTI cap from the qualified mortgage definition and replaced it with a price-based test tied to the loan’s annual percentage rate relative to comparable Treasury rates.4Consumer Financial Protection Bureau. Qualified Mortgage Definition Under the Truth in Lending Act – Final Rule In practice, most jumbo and commercial lenders still use DTI as an internal guideline, and staying below 43 percent remains a realistic target. Lenders must consider your DTI or residual income even where no single ratio automatically disqualifies you.
Down Payment and Cash Reserves
The down payment is where these loans hit hardest. Most jumbo lenders require at least 20 percent, so $200,000 on a $1 million home. Some accept 10 to 15 percent when compensating factors are strong, such as an exceptionally high credit score or substantial liquid assets, but 20 percent is the standard. Conventional commercial lenders often want 20 to 30 percent equity. SBA-backed loans can require as little as 10 percent.
Reserves surprise many borrowers. On jumbo loans in the $832,750 to $1.5 million range, expect lenders to require three to six months of mortgage payments in accessible accounts after closing. Six to nine months applies to loans up to $2.5 million, and nine to twelve months above that. Savings and checking accounts count. Certificates of deposit count. Retirement and investment accounts sometimes count at a discounted value.
Collateral and Property Diligence
For commercial loans, collateral often extends beyond the property itself to heavy equipment, diversified investment portfolios, or liquid cash deposits. The lender’s claim is documented through a security agreement or deed of trust, which creates a recorded lien giving the lender a prioritized claim for the life of the loan. Loan-to-value ratios on commercial property typically cap at 75 to 80 percent.
Commercial real estate financing also triggers a Phase I Environmental Site Assessment before closing. It reviews the property’s history for contamination risks like former industrial use or underground storage tanks. A standard Phase I runs $2,000 to $4,000 for typical commercial properties, more for large or complex sites. If it flags concerns, a Phase II involving physical soil or groundwater testing follows, at significantly higher cost, and can push closing back by weeks.
Documents to Assemble Before You Apply
Paperwork is the most time-consuming part of the process. Missing anything sends you back to the start. Pull everything together before you approach a lender.
- Two years of personal federal tax returns, plus two years of business returns if you’re applying as a business entity. Every page, every schedule.
- IRS Form 4506-C, which authorizes the lender to pull your tax transcripts directly from the IRS. The IRS retired the older Form 4506-T in 2021, so make sure you’re on the current version. The information on the form must match your filed returns exactly.
- Profit and loss statements and balance sheets for business applicants, no more than 60 to 90 days old, prepared by an accountant or generated from professional bookkeeping software using standard accounting principles.
- A personal financial statement listing everything you own and owe, including retirement accounts, real estate equity, mortgages, car loans, and student debt.
- A schedule of real estate owned, with each property’s current value, outstanding mortgage balance, rental income, and monthly payment.
- Two to three months of bank and investment statements for every account backing your reserves or down payment.
The numbers across these documents have to reconcile. If a tax return shows $400,000 in gross income but a profit and loss statement implies $500,000, the underwriter flags it and the file stalls. Cross-check balance sheet assets against your personal financial statement, and make sure every figure on the loan application traces back to a source document.
How Long Underwriting Takes
Once your file is in, an underwriter verifies each data point against your source documents and checks the file against the lender’s internal guidelines. Jumbo residential loans typically close in 30 to 45 days, though complex files or additional document requests can stretch that out. Commercial loans commonly run 45 to 90 days because the lender is evaluating both your personal finances and the cash flow of the business or property that will repay the loan. The lender orders a third-party appraisal during this period, which on commercial property can cost several thousand dollars and take weeks.
Most jumbo loans go through manual underwriting rather than the automated systems used for conforming mortgages. A human reads every document and makes judgment calls, which is both slower and more flexible. Strong compensating factors in one area can offset weakness in another, and a loan officer who knows your file can advocate for it during credit committee review.
Closing Costs
Closing costs at this loan size are substantial. On residential jumbo loans, origination fees typically run 0.5 to 1 percent of the loan amount, or $5,000 to $10,000 on a million-dollar mortgage. On top of that come appraisal, title insurance, attorney fees, recording fees, and in many states a mortgage recording tax calculated as a percentage of the loan amount.
Commercial closings cost more. Total closing costs for commercial mortgages commonly land between 3 and 6 percent of the loan amount, meaning $30,000 to $60,000 on a million-dollar loan for origination, legal review, environmental assessments, surveys, title work, and lender due diligence. SBA loans add a guarantee fee that varies by loan size and maturity. Budget for these separately from your down payment.
Terms That Bite Later
Prepayment Penalties
Most residential jumbo loans don’t carry prepayment penalties. Commercial loans almost always do, and they can be expensive. Three structures are common:
- Step-down penalties start at a set percentage of the outstanding balance and decrease each year, often 5 percent in year one, 4 percent in year two, and so on to zero.
- Yield maintenance compensates the lender for lost interest based on the difference between your loan rate and the current Treasury yield. When interest rates fall, the penalty gets larger, which catches borrowers off guard.
- Defeasance appears in loans packaged into commercial mortgage-backed securities. Instead of paying a penalty, you replace the property as collateral with government securities that produce the same cash flow as your remaining payments. It requires specialized consultants and can cost tens of thousands of dollars.
Negotiate these before signing. Even on commercial loans there’s often room to shorten the penalty period or cap the maximum amount. Getting locked into a 10-year yield maintenance provision on property you might sell in five years is one of the most expensive mistakes in commercial borrowing.
Personal Guarantees
Borrow through a business entity and the lender will almost certainly require a personal guarantee, putting your personal assets on the hook if the business can’t repay. That effectively strips the liability protection your LLC or corporation would otherwise provide for that specific debt.
An unlimited guarantee makes you personally liable for the full loan balance plus accumulated interest, fees, and collection costs. A limited guarantee caps your exposure at a fixed dollar amount or percentage of the outstanding balance. Which one you’re asked to sign depends on your negotiating position and the lender’s policies.
SBA-backed loans require personal guarantees from anyone owning 20 percent or more of the borrowing entity. If no single owner reaches that threshold, at least one owner must still guarantee. SBA guarantees are typically unlimited and cover the full loan amount. This is non-negotiable regardless of how strong the business financials look.
Loan Covenants
Commercial loans come with ongoing requirements called covenants, and violating one can trigger a default even if you’ve never missed a payment.
Affirmative covenants require you to do certain things: deliver quarterly or annual financial statements, maintain adequate insurance on collateral, and notify the lender of material changes to the business. Larger loans may require reviewed or audited financial statements rather than internally prepared ones.
Financial covenants set minimum thresholds, such as a debt service coverage ratio of 1.25 or higher, a minimum working capital ratio, or a maximum debt-to-equity ratio. Fall below the threshold and the lender can call the loan, demand additional collateral, or renegotiate terms. The most common trigger is a temporary dip in revenue, which is exactly when you can least afford tighter terms. Read every covenant before signing and negotiate thresholds that fit your actual cash flow, including seasonal fluctuations.
Interest Deductibility
Business interest on a million-dollar loan is deductible, but capped. Under Section 163(j) of the Internal Revenue Code, most businesses can deduct business interest expense only up to 30 percent of adjusted taxable income, plus any business interest income earned that year, with excess interest carried forward. For tax years beginning after December 31, 2024, the calculation adds back depreciation, amortization, and depletion when figuring adjusted taxable income, which increases the deductible amount compared to the 2022 through 2024 rules.5Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense If your business carries significant depreciation on equipment or property, that change meaningfully expands what you can write off. Run the numbers with a tax advisor before sizing the loan based on assumed deductions.
For residential jumbo mortgages, the standard mortgage interest deduction applies. You can deduct interest on up to $750,000 of mortgage debt used to buy, build, or substantially improve a primary residence or second home. On a $1 million mortgage, interest on the first $750,000 is deductible and interest on the remaining $250,000 is not.