How does a "jumbo loan" differ from a conventional loan?

A jumbo loan is characterized by its size, specifically in relation to the conforming loan limits established by Fannie Mae and Freddie Mac. These limits define the maximum loan amount that can be purchased or guaranteed by these government-sponsored enterprises. When a loan surpasses these limits, it is classified as a jumbo loan.

This distinction is significant because jumbo loans are not eligible for purchase by Fannie Mae or Freddie Mac, which means they typically have different underwriting requirements, potentially higher interest rates, and varying terms compared to conventional loans that fall within the conforming limits. In essence, the key defining feature of a jumbo loan is that it exceeds the limits set by these agencies, making answer choice C the correct one in this context.

The other options do not accurately reflect the nature of jumbo loans. For instance, jumbo loans do not necessarily require a lower credit score, and they are generally not insured by the government, as they fall outside of the conforming loan guidelines. Additionally, while some jumbo loans may have fixed interest rates, they also frequently come in adjustable-rate forms, making the statement about fixed interest rates only inaccurate.