A jumbo loan is a type of mortgage loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Conforming loan limits are the maximum loan amount that can be purchased or guaranteed by Freddie Mac and Fannie Mae, which are two government-sponsored entities that provide liquidity to the mortgage market.
Jumbo loans are typically used to finance high-end homes, luxury properties, or expensive real estate markets where the cost of housing is higher than the limit set by the FHFA. Because the loan amount is larger, jumbo loans often come with higher interest rates and more strict underwriting standards compared to conforming loans. The exact loan limits for jumbo loans vary by state and can change each year.
