A jumbo loan is a loan for an amount that exceeds the conforming loan limits for the county where the property is located. Because it doesn’t “conform” to the loan limit, a jumbo loan is by definition nonconforming. The current “conforming” (conventional) loan limit for a single-family (primary or second) home in Wisconsin is $453,100 and is set by Fannie Mae. When a mortgage goes beyond that amount (which equals a $566,000 purchase price with 20% down), it enters the category of a Jumbo Loan. Like other mortgages, Jumbo Loans come in the form of both Adjustable and Fixed Rates, which are often slightly higher than their conforming counterpart.
The market for more expensive homes is inherently riskier because of the limited number of potential buyers. As a result, property values are subject to greater swings, requiring more conservative underwriting requirements. Because of this higher risk, the average Jumbo Loan borrower typically has a better credit history, more stable income, and higher reserves (cash on hand or other assets that can be accessed, even retirement accounts) than a Conforming Loan borrower.