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Definition
A jumbo loan is a mortgage that exceeds the conforming loan limit set annually by the FHFA, which means it cannot be purchased by Fannie Mae or Freddie Mac. Because lenders keep these loans on their own books or sell them in private markets, the underwriting bar is higher. You'll typically need a higher credit score, a larger down payment, and more cash reserves than a conforming borrower would. The exact thresholds vary by lender and by the property's location, since conforming limits are higher in some high-cost areas. Interest rates and qualifying standards differ from one lender to the next, so it's worth comparing offers. Jumbo loans are common when buying in expensive housing markets or financing high-value properties where the loan amount naturally rises above the conforming cutoff.
Also Known As
Non-conforming loan
Jumbo mortgage
Above-conforming-limit loan
Non-agency loan
Used in Context
- Because the home's price pushed her loan amount above the FHFA conforming limit, she had to qualify for a jumbo loan instead of a standard conforming mortgage.
- The lender told him that the jumbo loan would require a larger down payment and more months of reserves than his last home purchase.
- A buyer who requested a high-balance quote through Dreamy Leads was matched with lenders that specialize in jumbo loans for expensive markets.
What makes a loan a jumbo loan?
A loan becomes a jumbo loan when it exceeds the conforming loan limit set annually by the FHFA. Above that limit, Fannie Mae and Freddie Mac can't buy the loan, so it's considered non-conforming and is handled under stricter private lending standards.
Do jumbo loans require a bigger down payment?
Typically, yes. Because jumbo loans can't be sold to Fannie Mae or Freddie Mac, lenders usually expect a larger down payment, a higher credit score, and more cash reserves. Exact requirements vary by lender and by the property's location, so compare offers.
Are jumbo loan limits the same everywhere?
No. The conforming loan limit is set annually by the FHFA, and it's higher in some high-cost areas. That means the dollar amount at which a mortgage becomes a jumbo loan can vary by location, so the same loan size may be conforming in one area and jumbo in another.
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