DEFINITION of 'Maximum Loan Amount'

Describes the maximum amount that a borrower can borrow. The maximum loan amount is based on a combination of different factors involving the specific loan program, the value of the property that secures the loan and the borrower's qualifying ratios and credit history. Lenders typically offer various loan programs with maximum loan amounts tailored for different classes of borrowers.

BREAKING DOWN 'Maximum Loan Amount'

In the mortgage industry, the Office of Federal Housing Enterprise Oversight (OFHEO) sets maximum loan amount limits on the mortgages that Fannie Mae and Freddie Mac may guarantee.

Because Fannie Mae and Freddie Mac guarantee a large percentage of mortgages originated in the United States, the "conforming loan limit" is an important number in the mortgage finance industry, as large mortgage default levels will create great strain on Fannie Mae and Freddie Mac.

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