This term specifically refers to a loan amount that is above the current Conforming Loan limits. The Conforming Loan limit is set by Fannie Mae and Freddie Mac. The present Conforming Limit is $417,000---so a Jumbo Morgage is any loan for an amount above and beyond $417,000. Because Fannie Mae and Freddie Mac are the largest purchasers of loans in the secondary market (the secondary market is where loans are bought and sold as investments), all jumbo loans have higher rates than conforming loans. This is simply because, with out Fannie Mae and Freddie Mac competing to buy these jumbo mortgages, there is less demand for them in the secondary market. To make these investments more attractive to potential purchasers in the secondary market the interest rates on these loans are increased.

With the increase in property values over the past few years many more people require jumbo loans---and lenders have responded to that. Many lenders now treat Jumbo Mortgages as any loan amount greater than $650,000 and simply refer to loans less than this amount (but above the Conforming Limit) as 'Non-Conforming' loans.