What is a Conforming Loan?

A conforming loan is a type of conventional mortgage loan that meets the guidelines set by government-sponsored entities like the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac. These conventional loans have specific limits on the loan amount, credit score, and debt-to-income ratio to ensure they qualify for purchase by these entities. Conforming loans are best suited for borrowers with stable finances, a good credit score, and a manageable debt-to-income ratio who are looking to purchase a home within the conforming loan limits. They typically offer competitive interest rates and favorable terms, making them a popular choice for many homebuyers.

What are Conforming Loan Limits?

Fannie Mae and Freddie Mac determine conforming loan limits each year in October based on the changes in the U.S. median home prices. The Federal Housing Finance Agency (FHFA), which oversees these enterprises, reviews home price data and adjusts the loan limits accordingly. If the median home price in a particular area has increased, the conforming loan limit for that area may also rise. For most of the United States, the baseline loan limit for a single-family home in 2024 is $806,500, but in high-cost areas, it can be as high as $1,209,750. These annual adjustments ensure that the conforming loan limits reflect current market conditions and help borrowers in different regions access affordable mortgage options.

Exceptions to these limits include certain high-cost areas, where the limits are higher to accommodate local housing markets. Additionally, there are limits for multi-unit properties, which are typically higher than for single-family homes. It's important to note that loans that exceed the Federal Housing Finance Agency’s limits are considered "jumbo loans," which fall outside the conforming loan guidelines and often come with stricter requirements.

Number of Units Maximum Original Principal Balance Limits in Alaska, Guam, Hawaii, & US Virgin Islands
1 $806,500 $1,209,750
2 $1,032,650 $1,548,975
3 $1,248,150 $1,872,225
4 $1,551,250 $2,326,875

Is a Conforming Loan Right for Me?

Whether a conforming loan is right for you depends on your financial situation and the property you're looking to purchase. Conforming loans are ideal for borrowers with stable income, good credit, and a manageable debt-to-income ratio. They offer competitive interest rates and favorable terms, but they also come with limits on the loan amount based on your location. If you're looking to buy a home within the conforming loan limits and meet the necessary qualifications, a conforming loan may be an excellent option. To help you assess whether a conforming loan is the best fit for your needs, use C&T Mortgage’s purchasing assistant tool for personalized guidance and loan recommendations.

Conforming Loan Requirements

To qualify for a conforming loan, borrowers typically need a solid financial foundation, including a minimum credit score of around 620, though higher scores may be required for better rates and terms. Lenders also look at your debt-to-income (DTI) ratio, which should ideally be below 43%, though some flexibility may be allowed with compensating factors such as a larger down payment or substantial savings. Additionally, borrowers must demonstrate reliable income and a stable employment history. Conforming loans are best suited for individuals with a good credit history and manageable debt who are looking to borrow within the set loan limits. Meeting these requirements helps ensure favorable loan terms and competitive interest rates.

Applying for a Conforming Loan

Applying for a conforming loan begins with gathering the necessary financial documents, including proof of income, tax returns, and details about your debts and assets. Next, you’ll work with a lender to complete your application, during which they will assess your credit score, debt-to-income ratio, and overall financial situation. Once your application is submitted, the lender will review it and determine if you meet the requirements for a conforming loan. If approved, you'll move forward with securing the loan, finalizing terms, and preparing for closing. A knowledgeable lender can guide you through each step to ensure a smooth application process.

Contact C&T Mortgage to Find the Loan for You

At C&T Mortgage, our team is dedicated to helping you navigate the home loan application process with ease. Speaking to one of our knowledgeable loan officers is the best way to start, as they will guide you through each step—from assessing your financial situation to explaining your loan options. They’ll take the time to understand your unique needs and provide personalized recommendations to ensure you choose the right loan for your goals. Whether you’re a first-time homebuyer or refinancing, our experts will offer clear guidance, answer your questions, and support you every step of the way. Reach out today to schedule a consultation and get started on the path to homeownership.