Conforming Loan Limit

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. Conforming Loan

    A mortgage that is equal to or less than the dollar amount established ...
  2. Jumbo Loan

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  3. Prime Conforming

    A sector of mortgage lending made up of loans to borrowers who ...
  4. Maximum Loan Amount

    Describes the maximum amount that a borrower can borrow. The ...
  5. Office Of Federal Housing Enterprise ...

    The federal regulatory body that oversees the government-sponsored ...
  6. Nonconforming Mortgage

    A mortgage that does not meet the guidelines of Government Sponsored ...
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