What is a Jumbo Loan - Definition

A jumbo loan is a mortgage with a loan amount above the industry standard definition of conventional conforming loan limits. This standard is set by Freddie Mac and Fannie Mae. The loan amounts reflect average loan sizes

nationwide. Jumbo mortgages apply when agency limits don't cover the full loan amount. Fannie Mae and Freddie Mac are large agencies that purchase the bulk of residential mortgages in the U.S. They set a limit on the maximum dollar value of any mortgage they will purchase from an individual lender. As of 2006, the limit is $417,000, or $625,500 in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

When to refinance a jumbo loan? Mortgages over the conforming limit carry a slightly higher rate than conforming loans because there is more risk for the lender. For a standard 30-year fixed-rate mortgage, you would most likely be paying about one-eighth to one-quarter of a percent more. However there are certain instances when that can be considerably more.