Real Estate City Information: Mortgages

Conforming and Nonconforming Loans

The term "conforming," as opposed to "nonconforming," is sometimes used to explain loans that offer terms and conditions that follow the guidelines set forth by Fannie Mae and Freddie Mac. These are the two private, congressionally chartered companies that buy mortgage loans from lenders, thereby ensuring that mortgage funds are available at all times in all locations around the country.

The most important difference between a loan that conforms to Fannie Mae/Freddie Mac guidelines and one that doesn't is its loan limit. Fannie Mae and Freddie Mac will purchase loans only up to a certain loan limit (currently $227,150, but will be $240,000 as of January 1, 1999).

If your loan amount will be for more than the conforming loan limit, the interest rate on your mortgage may be higher or you may have slightly different underwriting requirements, particularly in regard to your required down payment amount. Check with your lender about this if you are taking out a large loan amount.

Nonconforming loans are sometimes called jumbo loans.