A jumbo loan is a mortgage used to finance properties that are too expensive for a conventional conforming loan. A jumbo loan may be used when the loan amount exceeds the conforming loan limit applicable to the property’s location and current calendar year. Homes that exceed the local conforming loan limit require a jumbo loan.
Also called non-conforming conventional mortgages, jumbo loans are considered riskier for lenders because these loans can't be guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower defaults. Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms.