Jumbo loans are mortgage loans that exceed the conforming loan limit set by Freddie Mac and Fannie Mae each year. They are most commonly used to buy larger homes and luxury properties, and require borrowers to have a higher credit rating and a larger down payment than conventional loans, so lenders can be sure the borrower will pay back the loan. Jumbo loans usually have a higher interest rate because of the higher risk taken on by the lender, but since they are used to purchase higher-end homes, the overall cost may be offset by the greater value of the property.