Conforming Loan
Posted on December 2nd, 2005 at 2:24 pm by SwethA conforming loan is one that meets the underwriting guidelines of Fannie Mae or Freddie Mac for resale on the secondary mortgage market.
Conforming vs. Non-conforming
Lenders take on relatively little risk when they make conforming loans, as the odds are very high that these loans will be bought by Fannie or Freddie; as a result, these loans usually have a lower interest rate than non-conforming loans, which in one way or another violate Fannie & Freddie’s underwriting guidelines and thus must be sold to private investors.
Maximum Conforming Loan Amount and Jumbo Loans
For most buyers, the most significant of the underwriting guidelines for conforming loans is the maximum amount that can be loaned on a single property. Fannie and Freddie adjust this amount each year; for both 2006 & 2007, the maximum value for a conforming loan for a single-family home is $417,000. Loans larger than the conforming limit for a given year are non-conforming, and often are referred to as jumbo loans. (Note that these maximums are per-loan, so borrowers taking out a piggyback mortgage (e.g. an 80% first mortgage and a 20% second mortgage) only need to keep the value of the first mortgage under the appropriate conforming loan limit in order to qualify for conforming loan rates; the total combined value of both mortgages can thus be 125% of the appropriate conforming loan limit.)
Multi-family and historical conforming loan limits
Conforming loans are available for both single-family and multi-family properties with up to 4 units, with higher limits for properties with more units; for comparison, here are the conforming loan limits going back to 1998 for all sizes of conforming properties:
| Year | Conforming Loan Limit | |||
| One-family Properties | Two-family Properties | Three-family Properties | Four-family Properties | |
| 2007 | $417,000 | $533,850 | $645,300 | $801,950 |
| 2006 | $417,000 | $533,850 | $645,300 | $801,950 |
| 2005 | $359,650 | $460,400 | $556,500 | $691,600 |
| 2004 | $333,700 | $427,150 | $516,300 | $641,650 |
| 2003 | $322,700 | $413,100 | $499,300 | $620,500 |
| 2002 | $300,700 | $384,900 | $465,200 | $578,150 |
| 2001 | $275,000 | $351,950 | $425,400 | $528,700 |
| 2000 | $252,700 | $323,400 | $390,900 | $485,800 |
| 1999 | $240,000 | $307,100 | $371,200 | $461,350 |
| 1998 | $227,150 | $290,650 | $351,300 | $436,600 |