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What is a Conforming Loan?

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People can buy the conforming loans from Fannie Mae or Freddie Mac. That’s why these loans mean a lower risk to lenders and more beneficial terms for borrowers.

Don’t confuse conforming loans with conventional. Conventional loans don’t include loans provided by the US government. The rule covers FHA loans, VA loans, and loans from the United States Department of Agriculture.

The conforming loan limits make $417,000 for single-unit houses. If dealing with the high-cost housing markets, the FHFA increases the limits for conforming loans. In some cases, they reach $625,000.

The conforming loan limits 2018 are $453,100. In the high-cost living areas (Alaska, Washington, D.C., in metro zones) the limits can be as high as $679,650 this year.

The main advantage of the conforming loans is that they are easier to qualify and the interest rates are usually lower.

If you can’t afford the down payment of 20%, for instance, you can consider applying to the 97% loan-to-value program. First-home buyers usually benefit from this program because down payment can be as low as 3%. Buyers, who have already owned a home, can qualify for the 5% down payment program from Fannie Mae.