A jumbo mortgage loan is a loan that exceeds the lending limit set by the Federal Housing Finance Agency (FHFA). The FHFA sets the conforming loan limit annually. These loans are designed for luxury properties and have unique underwriting conditions and tax implications. Currently, the conforming loan limit is least $647,200 for most areas.
These loans are also referred to as non-conforming conventional mortgages; they generally have higher interest rates because, as the lender is not protected from loss if a borrower defaults, it is riskier for the lender. Jumbo mortgage loans typically have fixed or adjustable interest rate options.
Requirements
You are also more likely to be approved if you have a large amount of cash reserves. It is not uncommon for a lender to ask for 6 months or 1 year of reserves to cover those mortgage payments.
It is very competitive and documentation can be limited. Also, because jumbo mortgage loans are larger, expect to pay a larger down payment and closing costs.