What is a Conforming Loan?

A conforming loan is a loan that meets the loan limits and debt-to-equity ratio established by the Federal National Mortgage Association or Fannie Mae and the Federal Home Loan Mortgage Association (Freddie Mac). The limits that are set are based on the changes in home prices that are measured by Fannie Mae and Freddie Mac from October to October.

Conforming Loans

Conforming loans are important because they are packaged by lenders and sold as securities in the market. This provides needed capital necessary to provide more loans and make housing opportunities available to different borrowers.

Jumbo Loans

Loans that exceed the limits measured by Fannie Mae and Freddie Mac are non-conforming or jumbo loans. These loans are harder to sell and will result in a point or 2 higher in interest rates. Also, non-conforming loans that are written do not enjoy the backing of either Fannie Mae or Freddie Mac.