QandAs: Loans

What is a Conforming Mortgage?

Answer:
A conforming mortgage is a home loan that meets

the requirements set by either Freddie Mac or Fannie Mae. Once a mortgage company or bank finalizes a home loan, the majority of these loans are sold to a secondary mortgage market. The two agencies that buy a large bulk of mortgages are Freddie Mac and Fannie Mae; thus, these two agencies set the guidelines for most mortgage loans.

With a conforming mortgage loan, Freddie Mac and Fannie Mae ascertain a maximum loan amount, minimum income and credit requirements, and down payment requirements. The maximum loan amount on a conforming mortgage adjusts annually. This is necessary to accommodate rising property values or inflation.

In 2007, Freddie Mac and Fannie Mae set the loan limit at $417,000 for a one-family residence, and $533,850 for a two-family residence. Borrowers who choose a conventional mortgage loan can acquire a conforming loan up to these limits. In some instances, the median home price in many cities is higher than the maximum limit set forth by the secondary mortgage markets. Likewise, some homebuyers prefer a more expensive home. To acquire a higher purchase amount, borrowers can obtain a conforming loan for the maximum amount and a second mortgage for the excess or a single loan known as a Jumbo Loan .


	more Q&A sessions like this
	What is Jumbo Loan? What are the different types of Mortgages? What is a Non-Conforming Mortgage Loan? Why are Jumbo Mortgage Rates higher than Traditional Mortgages? Who is Fannie Mae and what do they do? Who is Freddie Mac? What is a 1003 Form? What is a Super Jumbo Mortgage? What is a conventional mortgage loan? What are the benefits of a fixed rate mortgage?