Jumbo Loan

Description:

A jumbo loan is a loan that exceeds the limit for a "conforming loan". The definition of a conforming loan is set by Fannie Mae and Freddie Mac. There are two types of conforming loan limits right now: general conforming loan limits, and high cost area conforming loan limits.

The 2009 general conforming loan limit is $417,000, and the high cost area conforming loan limit is $729,750. These numbers change frequently, and were recently increased as part of the economic stimulus.

A jumbo loan or mortgage is a loan that is higher than these amounts. Because these loans are above the limit, or "non-conforming", Fannie Mae and Freddie Mac don't purchase them. Thus, they generally have a higher interest rate and are harder to qualify for than conforming loans. Another reason is that loans on luxury homes are generally riskier, as the homes are more sensitive to the market and are usually harder to sell.

Jumbo loans have become substantially more difficult to qualify for and get due to the current credit markets and economy.