Which statement correctly differentiates jumbo loans from conforming loans?

Which statement correctly differentiates jumbo loans from conforming loans?

• A. Jumbo loans are non-conforming because they exceed the FNMA loan limit of $417,000
• B. Jumbo loans are always government-backed
• C. Jumbo loans are insured by FHA
• D. Jumbo loans are capped at $417,000

Answer: (A)

Jumbo loans are defined by their size: they exceed the conforming loan limit that Fannie Mae and Freddie Mac use. Because they’re larger than what the GSEs will typically buy, these loans are non-conforming. They aren’t generally government-backed or FHA-insured, and the conforming loan limit of $417,000 applies to conforming loans, not jumbo ones. So the correct statement is that jumbo loans are non-conforming because they exceed the FNMA loan limit. The other options are not accurate: jumbo loans aren’t always government-backed, aren’t insured by FHA, and aren’t capped at $417,000.

Jumbo loans are defined by their size: they exceed the conforming loan limit that Fannie Mae and Freddie Mac use. Because they’re larger than what the GSEs will typically buy, these loans are non-conforming. They aren’t generally government-backed or FHA-insured, and the conforming loan limit of $417,000 applies to conforming loans, not jumbo ones. So the correct statement is that jumbo loans are non-conforming because they exceed the FNMA loan limit. The other options are not accurate: jumbo loans aren’t always government-backed, aren’t insured by FHA, and aren’t capped at $417,000.