There are many different types of mortgages, each with numerous features. And that abundance of choice — fixed-rate, adjustable-rate, 15-year, 30-year, jumbo — can leave many homebuyers with spinning heads. But one option, a conforming loan, can be particularly attractive because of its less stringent borrowing requirements and loan limits.
Whether you’re a first-time homebuyer, a repeat buyer or looking to refinance, the simplicity and affordability of a conforming loan could be just what you need. Here’s what you need to know about conforming loan limits.
What is a conforming loan?
Mortgages, like the homes we buy, come in many different shapes and sizes.
A conforming loan is a mortgage that meets the borrowing limits set by the Federal Housing Financing Agency (FHFA). These limits are determined according to guidelines defined by the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac). If you’re unfamiliar, Fannie Mae and Freddie Mac are two government-sponsored enterprises that work with lenders nationwide and help facilitate mortgage lending.
A conforming mortgage may be conventional (meaning that it is offered or backed by a private lender or Fannie Mae or Freddie Mac) or non-conventional, which is when your loan doesn’t meet traditional borrowing standards and is secured through the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), for example, instead.
Conforming loans can be an attractive option for first-time homebuyers because you can make a down payment as little as 3% (although you will have to pay for private mortgage insurance until you’ve achieved 20% equity in the property).
Across the country, most places have one maximum loan amount for conforming loans. In 2023, the maximum conforming limit for a conventional loan for a single-family home is $726,200, an increase of $79,000 from $647,200 in 2022. The baseline limit is higher in Alaska, Guam, Hawaii and the U.S. Virgin Islands: $1,089,300 for a single-family unit.
Under the mandate of the Housing and Economic Recovery Act (HERA) of 2008, the conforming loan limit is adjusted each year to reflect the changes in the average price of a home in the U.S., and the baseline loan limit is set on a county-by-county basis. You can look up the 2023 conforming loan limits across the U.S. on this map.
Conforming loan limits in 2023
Baseline limit in 2023
Limit for high-cost areas in 2023
If you’re pursuing a non-conventional FHA loan, a separate loan limit applies (because these mortgages don’t meet Fannie Mae or Freddie Mac guidelines). Presently, the FHA loan limit is $472,030 for low-cost areas and can be as much as $1,089,300 for high-cost areas of the country.
Conforming loan limits in high-cost areas
The FHFA sets a larger conforming loan limit for areas it determines are high-cost, such as Washington D.C. and certain counties in California. The ceiling for conforming loans for one-unit homes in these areas increased to $1,089,300 in 2023.
That means if you’re buying a home in Los Angeles County and need a $900,000 mortgage, a conforming loan could still be an option because the amount you want to borrow falls within the conforming loan limit for high-cost areas.
But, if you’re wanting to purchase a townhouse in St. Louis, which isn’t currently considered a high-cost area, and need an $800,000 mortgage, a conforming loan would not be an option because you’d be exceeding the $726,200 baseline loan limit. Instead, you could consider a jumbo mortgage.
Advantages of a conforming loan
Conforming loans are typically backed by Fannie Mae or Freddie Mac, so they offer borrowers benefits that other mortgages don’t. The advantages of a conforming loan include:
Easier qualification requirements
Can offer a lower interest rate than other home loans, especially if you’re a borrower with greater financial resources and a strong credit score
Some flexibility when it comes to your credit score and other requirements (like income and amount of savings)
Disadvantages of a conforming loan
Now, the downsides of conforming loans:
Can't go over the conforming loan limit — if you do, you have to opt for a nonconforming loan
You may not qualify if you have poor credit or a high debt-to-income ratio, which describes the relationship between the amount of debt you have and amount you bring in
How to decide if a conforming loan is right for you
A conforming loan can suit many homebuyers, thanks to its ease, simplicity and affordability. Most lenders offer conforming loans, giving you the ability to shop around for the best interest rate. If you have a high credit score, you could qualify for an even lower rate, reducing your monthly payments and the overall amount you’ll pay in interest over the course of your home loan.
But if you’re purchasing an upscale property or a home in a particularly expensive area, the conforming loan limit might be too low.
With all the available options, understanding which mortgage is right for you can be a challenge. Learning more about the conforming loan limits can help you make the right choice.