What is a Conforming Loan?

A conforming loan is a loan that falls within the guidelines set up by the government sponsored entities (GSE) Fannie Mae and Freddie Mac.

These entities were created to help make home ownership more affordable for the average American homeowner, and therefore provide a much lower rate and payment than loans outside of these guidelines (non-conforming or jumbo loans).

Typically, the main defining factor of a conforming loan is that it falls at or under the specified loan amount limits. This limit has been $417,000 for quite some time.

However, as of February 13, 2008, these loan limits saw a very much needed increase in certain areas with high home values...like California. The new limits that were signed into affect by President Bush within the Economic Stimulus Package, allow for the conforming/conventional/FHA loan limits to be increased to 125% of the median home price, broken down by county, to a max loan amount of $729,750.  In Orange, Los Angeles and Ventura Counties, the maximum loan amount of $729,750 applies, allowing homeowners with loan amounts up to $729,500 to qualify for these more attractive mortgage terms.