A jumbo loan, or jumbo mortgage, is a home loan for an amount that exceeds the mortgage industry "conforming loan limits." Loan limits are set by Fannie Mae and Freddie Mac based on risk and other factors. Fannie Mae and Freddie Mac are Government Sponsored Entities or GSE’s who will only purchase conforming loans from mortgage lenders after the loan has closed. Fannie Mae and Freddie Mac are amongst the largest mortgage investors in the United States.
In 2022, Fannie Mae loan limits increased. The new loan limit for most of the country will be $647,200 — an 18.05% increase over the 2021.
However, not all loans are sold to mortgage investors after the loan closes. Some lenders will retain the mortgage for the life of the loan. When a lender decides not to sell the mortgage and instead keep the mortgage in their portfolio, additional underwriting may be required.
Jumbo loans are mortgages not within conforming loan limits, so they are not eligible for purchase by Fannie Mae and Freddie Mac. This means financial institutions who offers Jumbo loans will have to keep the loan in their own portfolio or find another investor to purchase the loan once it closes. In most all cases, the financial institutions will retain the jumbo mortgage loan.
Due to the inherent risks associated with jumbo loans, additional underwriting consideration is often necessary. Generally, Jumbo loans held in Horizon Credit Union’s portfolio should not exceed Horizon’s legal lending limit, and be held to an LTV of 85% of less.