A more thorough explanation:

A Jumbo loan, also known as a jumbo mortgage, is a type of mortgage loan that exceeds the limit set by the Federal Housing Finance Agency (FHFA). The FHFA sets limits on the amount of money that can be borrowed for a single-family home in all states. In 2020, the limit is $510,400 for most areas, but it can be higher in some high-cost areas.

For example, if you want to buy a home in a high-cost area like Hawaii or Alaska, you may need a jumbo loan because the cost of homes in those areas is higher than the FHFA limit. In that case, you would need to borrow more money than the limit set by the FHFA, and a jumbo loan would be the best option.

Jumbo loans usually have higher interest rates than conventional loans because they carry more risk for lenders. However, this is not always the case. Today, the average APR (annual percentage rate) for jumbo loans is often the same as or even lower than conventional loans.

To qualify for a jumbo loan, you need to have a good credit score and a low debt-to-income ratio. The credit score requirement is usually higher than 700, and the DTI ratio should be very low.

Overall, jumbo loans are a good option for people who want to buy a home in a high-cost area or need to borrow more money than the FHFA limit allows. However, they have stricter requirements than conventional loans and may have higher interest rates.