A jumbo loan is a mortgage loan that is in an amount above conventional conforming loan limits. This standard is set by Fannie Mae and Freddie Mac, and sets the limit on the maximum value of any individual mortgage they will purchase from a lender. Fannie Mae and Freddie Mac are government sponsored enterprises that purchase the bulk of U.S. residential mortgages from banks and other lenders. They are responsible for providing liquidity in the mortgage markets allowing lenders to approve more mortgages. When Fannie Mae and Freddie Mac limits don’t cover the full loan amount, the loan is referred to as a “jumbo mortgage”. The average interest rates on jumbo mortgages are typically higher than conforming mortgages.
