- Conforming Loan
-
Any type of mortgage loan that adheres to loan amount limits set by Fannie Mae or Freddie Mac . The main limitation is the amount of money people can borrow, but there are also standards for borrowers' debt-to-income-ratio (DTI) and the financial documentation they must provide to the loan underwriter . These conforming limits allow lenders to funds loans with interest rates .25 – 1.5% lower than what a buyer would otherwise pay. The standards are re-evaluated each year based on changes in average home prices from the previous year and can vary by state. Beginning January 1, 2009, the national conforming-loan limit is $417,000 for most areas, and $625,500 in areas the government designates as high-priced. Fannie Mae provides a spreadsheet of the conforming loan limits by county (Excel). Loans that are too big to conform to Fannie and Freddie limits are also known as jumbo mortgages . Most types of conventional loans conform, but jumbo mortgages are non-conforming and have higher rates because they rely on the investment backing from outside investors as opposed to the government-sponsored institutions Fannie Mae or Freddie Mac.
