A jumbo loan is a mortgage that is larger than a typical conforming loan and they are available in a variety of options and terms. It is similar to a conventional loan except that it exceeds the loan limits set by government sponsored enterprises like Fannie Mae and Freddie Mac. While a conventional loan follows the guidelines established by Fannie Mae and Freddie Mac, jumbo loans do not. They are considered to be non-conforming because they are higher than the conforming limit. These limits can vary from state to state and are based on the geographic location. In certain areas, the conforming loan limit is over $400,000 and in high cost areas, it can be over $600,000 to be considered a jumbo loan. A loan amount below the standard limit is considered to be a conforming loan because they follow the guidelines established by Fannie Mae and Freddie Mac. Conforming loan limits are set by Fannie Mae and Freddie Mac (GSEs) and are evaluated on an annual basis.
On average, the upper limits of a jumbo loan can range from one million to two million dollars and in some cases, a loan amount above that can be considered as a Super Jumbo Loan depending on the location and the lender. Jumbo loans usually have larger monthly payments and require a larger down payment, typically 20% or more compared to a conforming conventional loan. Typically conforming conventional loans require a 5% down payment. They also depend on the amount of the loan, the type of property, the number of units a property has, and whether or not it is a primary home. Jumbo mortgage interest rates are generally higher than a conforming conventional loan.