What Is A Conforming Loan?

Conforming loans are those that meet the requirements of government-sponsored enterprises Fannie Mae and Freddie Mac. The loan size is the most important conforming loan guideline. There are two types of conforming loan sizes limits: high-cost and standard. As of 2020, the conforming loan limit for one-unit properties in the United States is $510,400.

There are, however high-cost areas in the country with higher loan limits. For example, as of 2020, the maximum loan limit for a single-unit property in high-cost areas is $765,600. Other guidelines for conforming loans include the borrower's loan-to-value ratio, debt-to-income ratio, and credit score.

What Are The Benefits Of A Conforming Loan? What Are The Alternatives?

Because they can be easily purchased and sold on secondary mortgage markets, conforming loans often have lower interest rates than non-conforming loans. As a result, lenders find them less risky than other types of loans.

A Jumbo Loan may be necessary if you need to borrow a large amount. Jumbo loans are non-conforming loans that exceed the county's maximum loan limit.

An FHA loan may be an option if you aren't eligible for a conforming loan. Their loan limits can vary from one county to the next.

How Do I Find Out The Limit Of My County's Conforming Loan?

To view the FHFA website, you can determine the loan limits for conforming loans within your state or county.