Jumbo Loan Overview
A jumbo loan is a mortgage used to finance properties that are too expensive for a conventional conforming loan. The maximum amount for a conforming loan is $548,250 in most counties, as determined by the Federal Housing Finance Agency (FHFA). Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms. Unlike conventional mortgages, a jumbo loan is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac. Designed to finance luxury properties and homes in highly competitive local real estate markets, jumbo mortgages come with unique underwriting requirements and tax implications.
If you have your sights set on a home that costs close to half a million dollars or more—and you don’t have that much sitting in a bank account—you’re probably going to need a jumbo mortgage. There are much more stringent requirements that come with jumbo loans compared to conventional. This is because jumbo loans carry more credit risk for the lender.