A mortgage that exceeds conforming loan limits is called a _____ loan.

• A. Conforming
• B. Subprime
• C. Fannie Mae loans
• D. Jumbo

Answer: (D)

Exceeding the conforming loan limit identifies a non-conforming loan, specifically a jumbo loan. Conforming loans meet size limits set by the FHFA and can be purchased by Fannie Mae or Freddie Mac, which is why they’re called conforming. When a loan amount goes above those limits, it isn’t eligible for sale to the GSEs, so lenders use the term jumbo loan. Jumbo loans are common for higher-priced homes and often come with higher interest rates and stricter underwriting because they carry more risk and lack the GSE backing. The other terms don’t fit: a conforming loan stays within the limit; subprime refers to borrower credit risk, not loan size; Fannie Mae loans are about eligibility for purchase by Fannie Mae, not the size category; the correct label for large loans is jumbo.