What is the conforming loan limit?

What is the conforming loan limit?

• A. It is the maximum loan term.
• B. It is the maximum loan size Fannie Mae/Freddie Mac will purchase.
• C. It is the minimum down payment.
• D. It is the maximum interest rate.

Answer: (B)

The conforming loan limit is the maximum loan size that Fannie Mae and Freddie Mac will purchase or guarantee. This limit, set by the FHFA, determines which conventional mortgages qualify as conforming and can be sold to the GSEs. Loans at or below this limit are typically easier to originate and price because they can be sold to Fannie Mae or Freddie Mac, while loans above it are considered jumbo and often carry stricter underwriting, higher down payments, and sometimes higher interest rates. The limit can vary by location, being higher in expensive real estate markets. The other options describe different loan features—term length, minimum down payment, and interest rate—which are not what defines the conforming limit.

The conforming loan limit is the maximum loan size that Fannie Mae and Freddie Mac will purchase or guarantee. This limit, set by the FHFA, determines which conventional mortgages qualify as conforming and can be sold to the GSEs. Loans at or below this limit are typically easier to originate and price because they can be sold to Fannie Mae or Freddie Mac, while loans above it are considered jumbo and often carry stricter underwriting, higher down payments, and sometimes higher interest rates. The limit can vary by location, being higher in expensive real estate markets. The other options describe different loan features—term length, minimum down payment, and interest rate—which are not what defines the conforming limit.