What are Conforming Loan Limits?
Aptly named, loan limits are the limits to which a loan can be allowed. Loan limits vary by lender, product and region, and are included in each program’s specific mortgage guidelines.
Conforming loans that are backed by Fannie Mae or Freddie Mac have had the same limits since 2006, when they were raised to $417,000. Loans that exceed the conforming loan limits are referred to as “jumbo” loans, and are not typically backed by Fannie or Freddie.
Jumbo mortgage rates often differ from conforming loan rates, sometimes higher, sometimes lower. One difference remains the same – because jumbo loans are not backed by the government, they have stricter eligibility requirements.
How Changes in Conforming Limits Affect Borrowers
The reason this topic is important to buyers is that when limits are lowered, fewer buyers will be eligible for a loan, because the stricter standards will apply to more people.
We don’t yet know what the limits will be, but if a buyer wants to buy a home or a homeowner wants to refinance a home that is over the conforming limits, they may no longer meet Fannie Mae or Freddie Mac’s mortgage standards. There are other options.
In many markets loan limits for FHA loans exceed those of conforming ones. In high cost areas, like the Washington D.C metro are, for example.
Conforming limits have not been lowered since 1990. Be sure to consult your lender on the details, and we’ll report as soon as we know the limits.