Conventional Mortgage Financing

A conventional loan is a mortgage loan which may or may not be guaranteed or insured by the federal government. This means it may fall under Fannie Mae and Freddie Mac guidelines if it is within the conforming loan limits. This is importannt because the lending limits and underwriting conditions set by GSE's Fannie Mae or Freddie Mac benefit many borrowers. Their underwriting conditions determine the maximum loan amount a borrower (or borrowers) can borrow, amount of funds they need to bring in as a down payment, minimum credit scores, income criteria, and eligible properties.


Fannie Mae or Freddie Mac may purchase loans from the lender that adhere to their criteria. However, the loan servicing part may remain with the original lender to keep payments simple and easier for the borrower. A larger majority of loans originated in the U.S. fit into the conventional classification. Conventional loan may also be known as "conforming" and traditional jumbo loans.


As of January 2022, the conforming loan limits are $647,200. In 2017, Fannie Mae and Freddie Mac had loan limits only up to $424,100. During the last real estate boom, conforming loan limits moved up fairly quick from $227,500 in 1998 up to $417,000 in 2006.They did not start increasing again until 2016.

Jumbo loans are amounts above those loan limits with traditional underwriting guidelines. However, many counties with people getting a mortgage in California and other high cost areas in other states have higher conforming loan limits. In January, 2022 the highest conforming loan limit is $970,800.