A jumbo loan is a type of mortgage that exceeds the limits set by the Federal Housing Finance Agency (FHFA) for conforming loans. These loans are typically used to finance high-value properties and are not eligible for purchase by government-sponsored entities like Fannie Mae and Freddie Mac. As a result, they often come with stricter credit requirements and higher interest rates. Because jumbo loans are not backed by the government, lenders take on more risk. Borrowers usually need a higher credit score, a larger down payment, and a lower debt-to-income ratio to qualify. This makes them suitable for individuals with strong financial profiles looking to buy luxury homes or properties in expensive markets.