What is a Conforming Loan?
A conforming loan follows the guidelines set by Fannie Mae and Freddie Mac. One of the major guidelines for these entities is the loan amount. Conforming loan limits for 2019 is any loan amount under $484,350, and up to $726,525 in certain high-cost areas. Conforming loans also adhere to other guidelines such as the loan-to-value (LTV) and debt-to-income (DTI), requirements for private mortgage insurance, and more.
Benefits of a Conforming Mortgage
Getting a conforming loan can be advantageous if you qualify under the applicable guidelines.
- Easy documentation process
- Lower rates
- Higher loan-to-values (LTV)
- Potentially faster closing times
Conforming loans are the most common mortgages in the U.S. Although they are extremely common, the guidelines can be inflexible and therefore not for everyone. Conforming loan guidelines are best for people who have a steady income like W2, hourly, or a salary.
What if I Don’t Fit Into the Conforming Guidelines?
Conforming loans may not be for you if you have a combination of any of the below:
- Loan amount over $484,350 (or $726,525 in certain areas)
- Highly variable bonus or commission income
- Qualify using liquid assets rather than a salary
- Multiple real estate properties and rental income
If you don’t fit into the guidelines of Fannie Mae or Freddie Mac, there are many other options for you!