A jumbo loan, also known as a jumbo mortgage, is a type of home loan that exceeds the limits set by the Federal Housing Finance Agency (FHFA) for conforming loans. In most areas of the United States, the FHFA sets the limit at $726,200 for a single-family home in 2023. Any mortgage that exceeds this limit is considered a jumbo loan.
The main benefit of a jumbo loan is that it allows borrowers to finance a more expensive property than they would be able to with a conforming loan. This can be particularly useful for homebuyers in high-cost areas, where home prices exceed the conforming loan limit. Jumbo loans often come with competitive interest rates, which can help borrowers save money over the life of the loan.
Another benefit of jumbo loans is that they can be used to finance a variety of property types, including primary residences, vacation homes, and investment properties. However, because jumbo loans are considered higher-risk than conforming loans, they often have more stringent eligibility requirements.
Borrowers may need to have a higher credit score, a larger down payment, and a lower debt-to-income ratio in order to qualify for a jumbo loan.