Which type of loan might be used to finance an amount exceeding the GSE's loan limits?

Which type of loan might be used to finance an amount exceeding the GSE's loan limits?

• A. Conforming Loan
• B. FHA Loan
• C. Jumbo Loan
• D. VA Loan

Answer: (C)

A Jumbo Loan is specifically designed to finance amounts that exceed the limits set by Government-Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac. These limits are established to maintain the balance in the conforming loan market and ensure that loans eligible for purchase by GSEs can be financed at lower rates. When a borrower needs to finance a sum that is above these limits, a Jumbo Loan becomes the appropriate solution as it is not bound by the same restrictions and can cover larger loan amounts. In contrast, Conforming Loans are explicitly meant to meet GSE requirements, including loan limits, and therefore cannot be used for amounts above those limits. FHA Loans are designed primarily for lower-income borrowers and have their own limits usually aligned with conforming loan limits, while VA Loans are backed by the Department of Veterans Affairs but also have specific limits, especially for zero down payment loans. Thus, for financing beyond the GSE's limits, a Jumbo Loan is unequivocally the correct choice.

A Jumbo Loan is specifically designed to finance amounts that exceed the limits set by Government-Sponsored Enterprises (GSEs) like Fannie Mae and Freddie Mac. These limits are established to maintain the balance in the conforming loan market and ensure that loans eligible for purchase by GSEs can be financed at lower rates. When a borrower needs to finance a sum that is above these limits, a Jumbo Loan becomes the appropriate solution as it is not bound by the same restrictions and can cover larger loan amounts.

In contrast, Conforming Loans are explicitly meant to meet GSE requirements, including loan limits, and therefore cannot be used for amounts above those limits. FHA Loans are designed primarily for lower-income borrowers and have their own limits usually aligned with conforming loan limits, while VA Loans are backed by the Department of Veterans Affairs but also have specific limits, especially for zero down payment loans. Thus, for financing beyond the GSE's limits, a Jumbo Loan is unequivocally the correct choice.