Conforming Loans

Conforming loans are typically loans that are underwritten to either Fannie Mae or Freddie Mac guidelines. Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) are classified as 'GSE's' (Government Sponsored Enterprises). They were created to purchase long-term mortgages to enable private lenders to lend more mortgage money into the general marketplace. If a private lender adheres to the established Fannie or Freddie guidelines, they can sell that loan to Fannie/Freddie and relend that money, however in many cases it is more profitable to sell them in the secondary market to other banking institutions, such as Wells Fargo or Bank of America. For an interesting history of Fannie and Freddie click HERE.
Conforming Loans generally have the following characteristics, and are usually the most desirable option for residential borrowers:
  • Lowest Market Rates
  • Conservative Underwriting Guidelines
  • Limited tolerance for credit, income, or collateral issues


Conforming loans are offered in fixed rate loans of various duration (30, 25, 20, 15, and 10 years) as well as hybrid adjustable rate mortgages or ARMS (3-1, 5-1, 7-1, and 10-1) where the first number represents the number of the years the start rate remains in effect, after which time it is subject to adjust every 12 months. In the current rate environment, with fixed rates in the 2's and 3's, ARM's have had limited popularity.
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
NOTE: The conforming loan limit in Alaska, Hawaii, Guam and the Virgin Islands is 50% higher.