What is a jumbo loan?
A jumbo loan is a mortgage that exceeds the conforming loan limits set annually by the Federal Housing Finance Agency (FHFA), meaning it can’t be purchased by Fannie Mae or Freddie Mac. Because jumbo loans aren’t backed by these government-sponsored entities, they typically involve stricter underwriting and are used to finance higher-priced properties.
How It Works
- The loan amount exceeds the conforming limit for the property’s county, which varies by location and is adjusted annually, with higher limits in high-cost areas like much of California.
- Underwriting is typically stricter, often requiring higher credit scores, lower debt-to-income ratios, and larger cash reserves than a conforming loan.
- Down payment requirements are often higher than conforming loans, though this varies by lender and borrower profile.
- Rate and term structures vary, with jumbo loans available in fixed-rate, adjustable-rate, interest-only, and other configurations depending on the lender.
Who Uses This Loan
- Buyers purchasing homes priced above their county’s conforming loan limit
- Borrowers in high-cost markets where even modest homes exceed conforming limits
- High-net-worth buyers seeking financing structures beyond standard conforming guidelines
- Buyers of luxury or unique properties that require specialized underwriting