Loans that are too big to conform to Fannie Mae and Freddie Mac limits are known as _____ mortgages.

Loans that are too big to conform to Fannie Mae and Freddie Mac limits are known as _____ mortgages.

• A. Subprime
• B. Jumbo
• C. Conforming
• D. Adjustable-rate

Answer: (B)

Jumbo mortgages are loans that are larger than the conforming loan limits set by Fannie Mae and Freddie Mac. Because these limits define the maximum size of loans they will buy or guarantee, any loan exceeding them is non-conforming and is typically labeled a jumbo loan. The emphasis here is on loan size, not on the borrower’s credit quality or the rate structure. Jumbo loans often carry stricter underwriting—such as higher credit score requirements and larger down payments—since they pose greater risk to lenders. Subprime describes borrower risk, conforming refers to loans that meet GSE guidelines, and adjustable-rate describes how the interest rate can change over time, which can apply to both conforming and jumbo loans.

Jumbo mortgages are loans that are larger than the conforming loan limits set by Fannie Mae and Freddie Mac. Because these limits define the maximum size of loans they will buy or guarantee, any loan exceeding them is non-conforming and is typically labeled a jumbo loan. The emphasis here is on loan size, not on the borrower’s credit quality or the rate structure. Jumbo loans often carry stricter underwriting—such as higher credit score requirements and larger down payments—since they pose greater risk to lenders. Subprime describes borrower risk, conforming refers to loans that meet GSE guidelines, and adjustable-rate describes how the interest rate can change over time, which can apply to both conforming and jumbo loans.