Jumbo home loans are much larger than conventional loans. To qualify as a jumbo loan, a loan must be $322,700 or more in the continental United States. Alaska and Hawaii, however, have set higher jumbo loan limits for home owners.

The limits on jumbo loan amounts are set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Jumbo home loans can't receive funds from these two agencies, so they usually carry a higher interest rate than other home mortgage loans.

When Are Jumbo Home Loans Necessary?

Say you've got a financial or medical emergency on your hands, requiring a large infusion of cash. You have no extra cash on hand. As mentioned above, a jumbo home loan secures you $322,700 or more -- money might make all the difference in the world.

Jumbo home loans can also act as a large source of capital if you want to start up a new business, or send your child to an expensive school. These loans are available as fixed-term or adjustable-rate mortgages, or ARMs. Because of their large size, jumbo loans are often subject to additional underwriting restrictions.