What might be a reason for a loan to be classified as a jumbo loan?

A loan is classified as a jumbo loan primarily due to it exceeding conforming loan limits set by regulatory bodies. Conforming loans are those that meet the guidelines established by Fannie Mae or Freddie Mac, including limits on the loan amount. When a loan amount surpasses these limits, it cannot be sold to these government-sponsored enterprises and is thus categorized as a jumbo loan.

Jumbo loans are generally used to finance higher-value properties and may also have different underwriting requirements compared to conforming loans. They can involve greater risk for lenders, often leading to stricter credit requirements for borrowers and sometimes higher interest rates. However, the defining characteristic that distinguishes a jumbo loan from others is its size relative to conforming limits, which is why exceeding these limits is critical in identifying a loan as jumbo.