As the name implies, a jumbo loan covers a larger-than-normal loan amount. Jumbo loans can be used for primary homes as well as for investment properties and vacation homes.

The maximum size of a jumbo loan varies by lender and location. Qualifying guidelines can vary, too. Because the market for jumbo loans is smaller than the market for conforming loans, you might need to shop around a bit more to find a mortgage.

Aside from those caveats, jumbo loans aren’t much different from traditional mortgages. Payment schedules and other details are usually more or less the same. Borrowers can get fixed- or adjustable-rate jumbo mortgages with various term options. As of mid-December 2020, mortgage rates for jumbo loans were substantially higher than rates for conforming loans, about 50 basis points on average, or one-half of 1 percent.

If you want to borrow more than the loan limit for your area, you’ll need a jumbo loan. For 2022, the limit for Fannie Mae and Freddie Mac conforming loans in much of the country is $647,200. However, the loan limits are higher in expensive areas. For much of California and for the New York and Washington, D.C., metro areas, the 2022 loan limit is $970,800. Alaska and Hawaii also have loan limits of $970,800 for 2022.

The rates on jumbo mortgages fluctuate and can be higher or lower than the conforming mortgage rate.