Jumbo vs. Conventional Mortgages: An Overview Borrowers employ two types of financing to buy a home: jumbo and standard mortgages.
Both loans need homeowners to meet certain eligibility criteria, such as minimum credit scores, income thresholds, repayment capabilities, and down payment.
Both mortgages are granted and underwritten by private-sector lenders rather than government entities such as the Federal Housing Administration (FHA), the United States Department of Veterans Affairs (VA), or the USDA Rural Housing Service (RHS). Although they may serve the same function (to secure a property), these two mortgage products differ significantly.
Jumbo mortgages are used to purchase houses with high price tags, often in the millions of dollars. Conventional mortgages, on the other hand, are smaller and more appropriate for the demands of the average homebuyer. They may also be acquired by a government-sponsored enterprise (GSE), such as Fannie Mae or Freddie Mac.Jumbo mortgages. Jumbo mortgages, as the name implies, are loans designed to finance expensive residences.
They involve large money, frequently in the millions.
1Luxury properties and those located in extremely competitive local real estate markets are typically funded using jumbo mortgages.Jumbo mortgages or loans are nonconforming, owing mostly to their magnitude.
This means they do not meet the Federal Housing Finance Agency's (FHFA) loan size and value requirements, and hence cannot be backed by Fannie Mae or Freddie Mac. In addition, they surpass their respective counties' maximum conforming loan limit.
Source: Investopedia.com