Conforming Loans

What Is a Conforming Loan?

A conforming loan is one that meets the standards of loan guidelines established by government-sponsored enterprises Freddie Mac and Fannie Mae. The most well-known conforming loan guideline is the size of the loan. There are two different types of conforming loan size limits: standard and high-cost area. Most counties in the United States have a conforming loan limit of $417,000 for a one-unit property.

However, there are high-cost areas of the country that have loan limits up to $721,050. Most high-cost areas have maximum loan limits around $625,500. Conforming loans must also meet other guidelines related to a borrower’s loan-to-value ratio, debt-to-income ratio, credit score and history, documentation requirements, etc.

Why Do I Want a Conforming Loan? Are There Alternatives?

Conforming loans usually have lower interest rates than non-conforming loans because they are easily bought and sold on the secondary mortgage market. They tend to be a less risky investment for lenders.

If you are in need of a large loan amount you may need a jumbo loan. A jumbo loan is a non-conforming loan because it exceeds the county’s general or high-loan limit. In most areas of the country that would mean a loan amount of more than $417,000 but in high cost areas, it could be for a loan that is more than $721,050.

If you don’t qualify for a conforming loan, getting an FHA loan might also be a good alternative because their loan limits vary by county. You can shop for live, customized conforming, jumbo and FHA loan quotes on Zillow.

How Do I Look Up My County’s Conforming Loan Limit?

For general information about loan limits, check out Fannie Mae’s General Loan Limits for 2015.

For specific conforming loan limits for your individual county, check out the Federal Housing Finance Agency’s 2015 Conforming Loan Limits,