What is a jumbo loan considered?

A jumbo loan is accurately described as a loan that is nonconforming in terms of loan amount. This means that it exceeds the maximum limit set by the Federal Housing Finance Agency (FHFA) for conforming loans, which are typically eligible for purchase by government-sponsored enterprises like Fannie Mae and Freddie Mac. Because jumbo loans do not adhere to these conventional limits, they are viewed as higher-risk loans. As a result, they often come with stricter credit requirements, higher interest rates, and a more thorough approval process compared to conforming loans. Understanding this distinction is important, as jumbo loans cater to borrowers seeking higher loan amounts, often for luxury properties or homes in high-cost areas.