Conforming loans are conventional loans that meet bank-funding criteria set by Fannie Mae and Freddie Mac. Both of these stock-holding companies buy mortgage loans from lending institutions and secure them for resale to the investment community. Every year, from October to October, Fannie Mae and Freddie Mac establish limits on what constitutes a conforming loan based on the changes in the median home price. Anything that exceeds the lending limit set forth is considered a Jumbo Loan.
Buying back mortgage loans allow these agencies to provide a continuous flow of affordable funding to banks that reinvest their money back into more mortgage loans. Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market – effectively decreasing the demand for non-conforming loans.
Conforming Loan Limits:
|Number of Units||Maximum original principal balance||Alaska, Guam, Hawaii, and U.S. Virgin Islands only|
NOTE: The conforming loan limit in Alaska, Hawaii, Guam, and the Virgin Islands is 50% higher.
Additional information regarding conforming loan limits is set by the Office of Federal Housing Enterprise Oversight who sets the criteria on what constitutes what Fannie Mae and Freddie Mac can buy. As a whole, the OFHEO’s mission is to promote housing and a strong national housing finance system by ensuring the safety and soundness of Fannie Mae and Freddie Mac. The Office of Federal Housing Enterprise Oversight is the regulator of Fannie Mae and Freddie Mac, respectively.
For more information about Conforming Loans and limits, contact our Home Loan Specialists at (866) 717-9695 or use the tools on this site.