A jumbo mortgage is a mortgage loan offered in the United States for an amount above conventional conforming loan limits.

Fannie Mae and Freddie Mac set the limit on the maximum value of mortgages they may purchase from a lender. Fannie Mae (FNMA) and Freddie Mac (FHLMC) are government enterprises that purchase the bulk of U.S. residential mortgages from banks and lenders. This allows the banks and lenders to free up liquidity to lend more mortgages. If the loan amount exceeds Fannie Mae and Freddie Mac’s limits, the loan becomes a “Jumbo Loan” and is typically offered at a higher interest rate.

On February 13, 2008 President George W. Bush signed the Housing and Economic Recovery Act of 2008 which provided an increase to the conforming loan limit in the US. This limit was raised to $729,750 or 125% of the homes value within the metropolitan statistical area or whichever is lesser.

The $729,750 is now only for FHA loans, and the High Balance Conventional are specific and set by the FHFA. These limits can be found at fhfa.gov.

Since homes above the median price of $417,000 are considered luxury, upon of a jumbo mortgage, it may be difficult for a lender to sell the home quickly for full price. In most cases, higher down payments are required to reduce these risks and duplicate appraisals are sought for thorough value confirmation.

*These materials are not from HUD or FHA and were not approved by HUD or a government agency*