A jumbo loan, or jumbo mortgage, is a mortgage loan that exceeds the limit set by the Federal Housing Finance Agency (FHFA). The 2023 FHFA limit for a single-family home in most states is $726,200. There are exceptions for high-cost areas designated by statute including Hawaii, Alaska, Guam, the U.S. Virgin Islands, and some other high-cost counties, with loan limits ranging up to $1,089,300. The jumbo loan limits also differ for multiple unit housing, with a standard limit of $929,850 for two-unit housing and $1,123,900 for three-unit housing.
If a loan exceeds the FHFA’s limit, then it is not eligible for purchase by the government agencies that buy and sell loans from private lenders. As a result, private lenders take on more risk when offering jumbo loans.
Historically, jumbo loans had a higher interest rate than conventional loans, due to their riskier nature. Today, the average annual percentage rate (APR) for a jumbo loan is often par with conventional loans, and sometimes even lower. Jumbo loans have a more rigorous credit requirement than conventional loans because jumbo loan lenders carry higher risks than conventional loan lenders. Usually, the credit score requirement is higher than 700, and the DTI (debt-to-income) ratio should be lower than normal.
[Last updated in June of 2023 by the Wex Definitions Team]