A conforming loan is a mortgage loan that conforms to Fannie Mae and Freddie Mac guidelines. Conforming loans are part of each major loan program, including conventional loans and government-sponsored products like FHA loans, VA loans and USDA loans. They’re considered “conforming” because they conform to the loan limits that are set by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, organizations that buy mortgages from lenders.
Conforming loans usually have lower interest rates than non-conforming loans because they are easily bought and sold on the secondary mortgage market, making them a less risky investment for lenders.
The main guideline is the size of the loan. With loan limits established for each county, the conforming loan threshold is $453,100 for single family homes in most of the United States. Anything over that amount is considered a jumbo loan, and typically has higher rates associated with it. In the highest-cost property areas, however, loans have to go over $679,650 to reach jumbo territory.
The 2018 conforming loan limits for properties in the contiguous United States are:
- One-unit properties: $453,100
- Two-unit properties: $580,150
- Three-unit properties: $701,250
- Four-unit properties: $871,450
It’s possible to avoid exceeding the conforming limit amount by putting more money down, thereby lowering the loan amount.
Another way to avoid moving to a jumbo loan is to break your loan up into a first mortgage and second mortgage, known as a combo mortgage. Second mortgages often come with higher mortgage rates than first mortgages, however, along with their own set of closing costs and fees, so take that into account.
Aside from the loan amount limit, other guidelines include the size of your down payment, your debt-to-income ratio, and your credit score and history. Fannie Mae and Freddie Mac generally require a minimum credit score of 620.
Park Place Finance has years of experience with a wide variety of loans, so we can help you determine the type of loan that is best for your situation.
SUPER -CONFORMING LOANS
The Economic Stimulus Act of 2008 allows Fannie Mae and Freddie Mac to purchase mortgages in “high cost” housing markets through a “super-conforming” loan. A super-conforming mortgage is available for loans over the maximum “conforming” loan amount of $453,100. These “super-conforming” limits are equal to 115% of local median house prices up to a maximum of $679,650. (Higher limits are permitted for 2-4 unit properties and properties located in Alaska and Hawaii.)
2018 Loan Limits
Units Minimum/Maximum Original Loan Amount
Minimum Loan Amount Maximum Loan Amount*
1 >$453,100 $679,650
2 >$580,150 $870,225
3 >$701,250 $1,051,875
4 >$871,450 $1,307,175
Depending on the county, if you need a loan above $453,100 and don’t want to take on multiple mortgages, this loan typically offers lower interest rates than a [jumbo loan]. Super-conforming loans are available to those with credit scores as low as 620 and come with down payment requirements as low as 5%.