What defines a jumbo loan?

A jumbo loan is characterized specifically by exceeding the conforming loan limits set by the Federal Housing Finance Agency (FHFA). These limits vary by region but generally reflect the maximum amount that can be backed by government-sponsored entities like Fannie Mae and Freddie Mac. Since jumbo loans are not eligible for purchase by these entities, they carry different criteria and requirements.

This distinction is crucial because it means that jumbo loans are often subject to stricter underwriting guidelines, higher credit scores, and larger down payment requirements compared to conforming loans. Rather than being limited by the parameters imposed by government entities, jumbo loans cater to high-value properties, allowing borrowers to finance amounts that surpass standard limits.

Jumbo loans are not necessarily defined by being government-backed, having a fixed interest rate, or being available only to first-time homebuyers. Each of these alternatives represents specific aspects of loan types or borrower categories but does not directly contribute to the definition of a jumbo loan itself.