Conforming loan
From Wikipedia, the free encyclopedia
A conforming loan is a loan that meets bank funding criteria.
Because of its stake in the mortgage market and because of its history, Fannie Mae and Freddie Mac each year set the limit on what constitutes a conforming loan, based on the October-to-October changes in mean home price, above which a mortgage is considered a jumbo loan, and typically has higher rates associated with it. This is because both Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market, making the demand for a non-conforming loan much less. By virtue of the laws of supply and demand, then, it is harder for lenders to sell the loans, thus it would cost more to the consumers (typically 1/4 to 1/2 of a percent.) The conforming loan limit is 50 percent higher in Alaska, Hawaii, Guam and the US Virgin Islands.
[edit] Conforming Loan Limits
Following are the 2006 Conforming Loan Limits:
| Number of Units |
Maximum original principal balance |
Alaska, Guam, Hawaii, and U.S. Virgin Islands only |
| 1 | $417,000 | $625,500 |
| 2 | $533,850 | $800,775 |
| 3 | $645,300 | $967,950 |
| 4 | $801,950 | $1,202,925 |
[edit] External links
- Historical Conforming Loan Limits, (.pdf, 39KB, 1 page).
- Understanding Conforming Loans / Jumbo Loans
