Conforming mortgages is so named because, literally, they conform to the mortgage guidelines set forth by Fannie Mae and Freddie Mac.
Of the many traits of a conforming mortgage, one is “loan size” and loan sizes have limits. Mortgages exceeding this loan size limit cannot be securitized as a conforming mortgage and, therefore, are ineligible for conforming mortgage rates.
Conforming mortgage rates are often the cheapest source of mortgage money , all things equal.
Each year, the government re-evaluates its maximum allowable loan size based on “typical” housing costs nationwide. Loans in excess of this amount are often called “jumbo”.
Between 1980 and 2006, as home prices increased, so did conforming loan limits — from $93,750 to $417,000. Since 2006, however, home prices have retreated but the conforming loan limit has not.
In 2011, for the 6th consecutive year, $417,000 will be the country’s conforming mortgage loan limit.
Conforming loan limits very by property type. The complete breakdown is as follows:
- 1-unit properties : $417,000
- 2-unit properties : $533,850
- 3-unit properties : $645,300
- 4-unit properties : $801,950
Despite the limits, some parts of the country get “loan limit exceptions”. In areas considered “high cost”, conforming loan limits range from $417,001 to $729,750. High-cost is defined by the median sales price of a region.
Los Angeles County, for example, is a high-cost region, along with a lot of California. There are less than 200 such areas nationwide, though.
You can verify your local market’s loan limit via the Fannie Mae website. A complete county-by-county list is published online.