A Jumbo loan, or jumbo mortgage, is a mortgage loan that exceeds the limit set by the Federal Housing Finance Agency (FHFA). The 2020 FHFA limit for a single-family home in all states is $510,400 (except Hawaii, Alaska, Guam, U.S. Virgin Islands, and some other high-cost areas, which will be $765,600). (See this media release of FHFA regarding the 2020 limit.)
Usually, jumbo loans have higher interest rate than conventional loans. But this may not always be the case. Today, the average APR (annual percentage rate) for jumbo loan is often par with conventional loans, and sometimes even lower.
Jumbo loans have a more rigorous credit requirement than conventional loans. This is 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 very low.
[Last updated in July of 2020 by the Wex Definitions Team]