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As home prices keep rising, a growing number of Americans are getting a crash course in conforming loan limits, the number that distinguishes the most common loan types from jumbo loans. These limits vary from year to year, and by geographic area.
What is the conforming loan limit?
The conforming loan limit is set each year by the Federal Housing Finance Agency (FHFA). If a mortgage falls within the conforming loan amount and meets other criteria, it’s eligible for purchase by Fannie Mae and Freddie Mac, which buy most of the home loans in the U.S. and sell them to investors on the secondary market.
Mortgages in amounts above the conforming limit are considered jumbo loans, and can’t be purchased by Fannie and Freddie.
Conforming loan limits in 2024
For much of the U.S., the divide between conforming loans and jumbo mortgages is $766,550 in 2024. That’s about a 6 percent increase from the 2023 limit of $726,200.
In pricey housing markets — including much of California, all of New York City, the District of Columbia and the entire states of Alaska and Hawaii — the limit is $1,149,825, up from $1,089,300 in 2023.
Some markets fall in between. In Colorado’s Boulder County, the 2024 limit for conforming loans is $856,750. In Florida’s Monroe County, home to the Keys, the limit is $929,200. In the Nashville, Tennessee, market, it’s $943,000.
How do conforming loan limits work?
Conforming loan limits increase based on the FHFA’s House Price Index. As home prices rise, so do the limits.
If you borrow less than the conforming loan limit, you have a conforming loan.
If you need more than that amount, your next option is a jumbo loan. Because the market for jumbo loans is smaller than the market for conforming loans, you might need to shop around a bit more to find a mortgage. Compared to conforming loans, jumbo loans require higher credit scores and down payments.
What to consider before borrowing more than the conforming loan limit
You’ll have more buying power with a jumbo loan than with a conforming loan, but you’ll pay more in interest since your balance is bigger. As of late, jumbo mortgage rates have been slightly lower than conforming mortgage rates.
To qualify for a jumbo loan, you’ll need a higher credit score — and possibly a higher income or more assets — than you would for a conforming loan. While some lenders allow credit scores as low as 660 on jumbo loans, most look for 700 or higher. For a conventional conforming loan, the minimum credit score is 620.
FAQ on conforming loans
A conforming loan refers to a type of mortgage that aligns with the criteria set by the Federal Housing Finance Agency (FHFA). These include parameters around credit score, debt-to-income (DTI) ratio and loan limit.
Simply put, conforming loans conform to, or fit within, criteria set by the Federal Housing Finance Agency (FHFA). Nonconforming loans do not meet these requirements. As a result, conforming loans can be sold to Fannie Mae and Freddie Mac, but nonconforming loans can’t.