A jumbo loan is a type of mortgage that is used when properties are too expensive for a normal, conforming loan. The federal agency FHFA (Federal Housing Finance Agency) has set the maximum amount for a conforming loan at $548,250 for most counties.
If the property value exceeds this amount, a jumbo loan would be necessary. Unlike conforming loans which are backed by Fannie Mae and Freddie Mac, jumbo loans are not associated with these government entities and are thus considered to carry a higher risk. Because of this, jumbo loans usually come with either a fixed or adjustable interest rate, and the term may vary.