Jumbo loans are mortgages that exceed conforming loan limits established by regulation.
Maximum loan limits are set by two government-sponsored enterprises known as Fannie Mae and Freddie Mac. Together they set the limits on the maximum loan value of any individual mortgage they will purchase from a lender. In most areas, the maximum limit is $453,100 but in some higher cost areas, the maximum conforming size loan can be as high as $679,650.
When the limits set by Fannie Mae and Freddie Mac do not cover the full loan amount the loan is considered a jumbo mortgage.
Keep in mind that as a borrower, jumbo loans are based on loan amount and not purchase price. Loan amounts must be greater than $453,100 to use a jumbo loan. For example, if a home is bought for a purchase price of $460,000 and $30,000 is put down the loan amount would be $430,000. This would be considered a conforming loan.