DEFINITION of 'Conforming Loan Limit'

The limit on the size of a mortgage which Fannie Mae and Freddie Mac will purchase and/or guarantee. The conforming loan limit is set annually by Fannie Mae's and Freddie Mac's federal regulator, The Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO uses the October to October percentage increase/decrease in the average house price in the monthly interest rate survey of the Federal Housing Finance Board (FHFB) to adjust the conforming loan limits for the subsequent year.

BREAKING DOWN 'Conforming Loan Limit'

Mortgages which exceed the conforming loan limit are known as jumbo mortgages. The interest rate on jumbo mortgages can be higher than the interest rate on conforming mortgages. A borrower whose mortgage amount slightly exceeds the conforming loan limit should analyze the economics of reducing their loan size through a larger downpayment or possibly using secondary financing to qualify for a conforming mortgage verses a jumbo mortgage.

RELATED TERMS
  1. Prime Conforming

    A sector of mortgage lending made up of loans to borrowers who ...
  2. Federal Housing Finance Agency ...

    A U.S. government agency created by the Housing and Economic ...
  3. Agency Swap Program

    A form of securitization whereby single-family residential mortgages ...
  4. Tandem Plan

    A mortgage purchase program subsidized by the U.S. government. ...
  5. House Price Index - HPI

    A broad measure of the movement of single-family house prices ...
  6. Gnomes

    15-year, fixed-rate, pass-through securities offered by the Federal ...
Related Articles
  1. Investing

    Fannie Mae and Freddie Mac, Boon Or Boom?

    These two companies are crucial to the mortgage market, but are they ticking timebombs?
  2. Personal Finance

    When You Need a Jumbo or Super-Jumbo Mortgage

    Rising housing prices have made so-called jumbo and super-jumbo loans a necessity for more homebuyers.
  3. Insights

    Fannie Mae, Freddie Mac And The Credit Crisis Of 2008

    Is the U.S. Congress' failure to rein in these mortgage giants to blame for the financial fallout?
  4. Personal Finance

    Jumbo Loan

    A mortgage with a loan amount exceeding the conforming loan limits set by the Federal Housing Finance Agency (FHFA) and, therefore, not eligible to be purchased, guaranteed or securitized by ...
  5. Personal Finance

    Jumbo Vs. Conventional Mortgages: How They Differ

    Size does matter – and it affects everything from down payments to interest deductions.
  6. Personal Finance

    Why Fannie Mae And Freddie Mac Might Be In Trouble

    Fannie Mae and Freddie Mac are under increased scrutiny as debates continue about conservatorship, share price, and profit allocations.
  7. Investing

    Who is Ruling the Jumbo Mortgage Market?

    The jumbo mortgage market appears to be booming this year, despite the few economic hurdles everyone's battling. Here's who is ruling the industry.
  8. Small Business

    Remodeling The Housing Finance Industry

    The meltdown in mortgage-backed securities is bringing about reform in home financing.
  9. Insights

    Freddie Mac May Follow Fannie Mae Into Rental Market

    Freddie Mac may follow Fannie Mae's example and guarantee financing in the single-family rental market.
  10. Personal Finance

    It Pays to Be a ‘HENRY’

    Why? Because being a “High Earner Not Rich Yet” may help you buy the house of your dreams with a lower down payment.
RELATED FAQS
  1. How do you use the FNMA selling guide?

    Learn about Fannie Mae Selling Guide and find out details about how its parts provide support to the business relationship ... Read Answer >>
  2. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ... Read Answer >>
  3. If My Mortgage Lender Goes Bankrupt, Do I Still Have to Pay My Mortgage?

    Yes, if your mortgage lender goes bankrupt you do still need to pay your mortgage obligation. Here's what usually happens ... Read Answer >>
  4. How does a decline in housing prices affect the banking sector?

    Learn about the affects on banks when housing prices go down, including loan delinquency rates, mortgage foreclosures, and ... Read Answer >>
Trading Center