A jumbo loan is a type of home mortgage that exceeds the limits set by the Federal Housing Finance Agency (FHFA). Unlike conventional mortgages, a jumbo loan is not eligible to be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac.
They are called non-conforming loans and pose a higher risk to lenders. Qualification requirements can vary among lenders, but you may need higher credit scores, down payment and cash reserves, and you’ll pay higher interest rates and experience greater scrutiny of your financial sources.
These loans are designed to finance luxury properties in highly competitive local real estate markets. Jumbo mortgages normally come with more stringent underwriting requirements.
Loan limits are determined by the FHFA by state and county and for 2022 the agency raised the maximum conforming loan limit for a single-family property from $548,250 (in 2021) to $647,200. Illinois and surrounding Midwestern states fall into these price guidelines. In certain high-cost areas, such as California and New York, the ceiling for conforming mortgage limits is 150% of that limit, or $970,800 for 2022.