WHAT IS A JUMBO MORTGAGE
A jumbo mortgage is a type of home loan that exceeds the maximum loan amounts set by government-sponsored entities Fannie Mae and Freddie Mac. In most areas of the United States, the conforming loan limit for a single-family home is $726,200 in 2023. Loans larger than this amount are considered jumbo loans. Jumbo loans typically have higher interest rates and more strict qualification requirements compared to conforming loans. They may also require a larger down payment and additional documentation to prove the borrower's income and assets. Jumbo mortgages are often used for luxury properties or high-priced homes in expensive cities.
People often choose to get a jumbo mortgage when they need to borrow more money than the conforming loan limits set by Fannie Mae and Freddie Mac allow. For example, if you want to purchase a luxurious or expensive home in a high-cost area, the purchase price may exceed the maximum loan limits. In these cases, a jumbo mortgage may be the only option for financing the home. Additionally, some buyers may choose a jumbo mortgage to avoid taking out multiple loans or to maintain liquid assets for other purposes. It's important to note that the qualification requirements for jumbo mortgages are often more stringent than for traditional mortgages, and borrowers typically need a high credit score and a large down payment to qualify.