A jumbo loan is a mortgage that falls outside of the FHFA “Federal Housing Finance Agency” used to finance properties that are too expensive for a conventional conforming loan. The maximum loan limits for a conforming loan are determined by the Federal Housing Finance Agency (FHFA). Homes that exceed the local conforming loan limit require a jumbo loan.

Also called non-conforming conventional mortgages, jumbo loans are considered riskier for lenders because these loans can’t be guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower defaults. Jumbo loans are typically available with either a fixed interest rate or an adjustable rate, and they come with a variety of terms.