Conforming Loan Limit

AAA

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.

INVESTOPEDIA EXPLAINS '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. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Country Limit

    The aggregate limit that a bank places on all borrowers in a ...
  3. Conforming Loan

    A mortgage that is equal to or less than the dollar amount established ...
  4. Conventional Mortgage

    A type of mortgage in which the underlying terms and conditions ...
  5. Fannie Mae - Federal National Mortgage ...

    A government-sponsored enterprise (GSE) that was created in 1938 ...
  6. Freddie Mac - Federal Home Loan ...

    A stockholder-owned, government-sponsored enterprise (GSE) chartered ...
Related Articles
  1. Understanding Your Mortgage
    Personal Finance

    Understanding Your Mortgage

  2. 4 Steps To Attaining A Mortgage
    Credit & Loans

    4 Steps To Attaining A Mortgage

  3. Understanding The Mortgage Payment Structure
    Credit & Loans

    Understanding The Mortgage Payment Structure

  4. 4 Overlooked Homeownership Costs
    Home & Auto

    4 Overlooked Homeownership Costs

comments powered by Disqus
Hot Definitions
  1. Walras' Law

    An economics law that suggests that the existence of excess supply in one market must be matched by excess demand in another ...
  2. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  3. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  4. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  5. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
Trading Center