Difference Between a Conventional Jumbo & an ARM Home Loan

Jumbo mortgage loans have high limits and may be set at adjustable rates.

Conventional mortgages are any loans made through private institutions without federal assistance. Just because a loan is conventional, though, does not mean it is conforming. It may have very high limits or even offer adjustable rates.

Definitions

A jumbo conventional loan exceeds the conforming loan standards set by Fannie Mae or Freddie Mac each year. Adjustable rate mortgage, or ARM, home loans are also non-conforming to government standards because the interest rate adjusts.

Significance

Whenever a loan is non-conforming, it cannot be purchased by or issued by these government-supported institutions. Therefore, both jumbo loans and ARM loans will not qualify for federal programs provided by Fannie Mae, Freddy Mac or the Federal Housing Administration.

Warning

Do not mistake a conventional loan for a conforming loan. Plenty of private mortgage loans are termed "conventional," despite their inability to conform to national lending standards. These loans may have higher costs and risks than conforming loans.

References

• Lending Tree: Conventional Loan
• eFannieMae.com: Loan Limits for Conventional Loans