What is the difference between a "jumbo" and a "conforming" loan?

Fannie Mae and Freddie Mac were created to provide liquidity to the mortgage industry as an outlet for mortgage bankers to sell their mortgage loans to. However, both FNMA an FHLMC have a maximum dollar amount in which they will purchase a loan. 

Loans above these limits are referred to as JUMBO loans. These loans are bundled together and sold to investors around the world. Typically the rates on these loans are higher than loans sold to FNMA and FHLMC.