A conforming loan is a type of conventional mortgage that’s limited to about $650,000 in most of the US

Young woman sitting at a desk with a baby in her lap, looking at her laptop
Conforming loans are what you may think of as a “regular mortgage.”

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective. Terms apply to offers listed on this page. Read our editorial standards.

  • A conforming loan is a type of conventional loan, or a mortgage not backed by the government.
  • The FHFA sets the borrowing limit for conventional loans, which for 2022, is $647,200 in most parts of the US.
  • You’ll need a nonconforming loan to borrow more than the limit set by the FHFA.
  • Sign up for Personal Finance Insider’s email newsletter here »

What is a conforming loan?

A conforming loan is a type of conventional loan, or a mortgage not backed by a government agency such as the FHA. 

A conforming loan meets the borrowing limits set by the Federal Housing Finance Agency (FHFA). The FHFA sets the limit for conforming loans every year. For 2022, the limit is $647,200 in most parts of the US. In areas with a higher cost of living, such as Alaska, Hawaii, Guam, and the US Virgin Islands, the limit has been bumped up to $970,800.

Conforming loans vs nonconforming loans

Both conforming and nonconforming loans are types of conventional mortgages. The differences come down to the amount you borrow and the eligibility requirements.

You’ll get a conforming loan if you need to borrow an amount under the limit set by the FHFA. You’ll need a nonconforming loan, otherwise known as a jumbo mortgage, if you need to borrow more.

For a conforming loan, most lenders require at least a 620 credit score and between a 36% and 50% debt-to-income ratio. You’ll also need a 10% down payment, or just 3% if your conforming loan is backed by government-sponsored mortgage companies Freddie Mac or Fannie Mae.

Eligibility requirements for nonconforming loans are a bit stricter, because lenders are taking a greater risk by lending you more money. Each lender has its own requirements for nonconforming loans, but you’ll likely need a higher credit score, lower DTI, and bigger down payment than you would for a conforming mortgage.

Conforming loans vs other types of mortgages

A conforming loan is a type of conventional loan, but you don’t necessarily need to get a conventional mortgage. Instead, you may opt for a government-backed mortgage.

Each type of government loan has its own eligibility requirements. There are three main types of government-backed mortgages:

  • FHA loans: You can get a mortgage with a lower credit score and higher DTI than with a conforming loan, and you’ll need a 3.5% down payment.
  • VA loans: Military families can get VA loans with no down payment.
  • USDA loans: You can buy a home with no down payment if you have a low-to-moderate income and are buying in a rural or suburban area.

You may find that one of these types of mortgages is a better fit than a conventional mortgage, even if you’re borrowing an amount that qualifies you for a conforming loan.

The pros and cons of conforming loans

Before applying for a conforming loan, consider its advantages and disadvantages versus a nonconforming loan, and versus government-backed loans.


  • Less stringent requirements than nonconforming loans. You can qualify for a conforming loan more easily than for a nonconforming loan. A jumbo mortgage often requires a better credit score, lower debt-to-income ratio, and higher down payment.
  • Lower interest rates than for some mortgages. Lenders usually charge lower rates on conforming loans than on nonconforming loans.


  • Stricter requirements than for some loans. With government-backed mortgages, you may qualify for a loan with a lower credit score, higher DTI, and/or a lower down payment than you would with a conforming loan. The exact requirements will depend on which type of government loan and which lender you choose.
  • Borrowing limit. You can only borrow a certain amount with a conforming loan. If you need more than the FHFA allows, you’ll want to go with a nonconforming loan.
  • Private mortgage insurance. If you have less than 20% for a down payment, you’ll have to pay for PMI until you gain more equity in your home. PMI typically costs between 0.2% and 2% of your mortgage amount. Although you have to pay for mortgage insurance and other fees with government-backed loans, you won’t have to pay for PMI. Avoiding PMI could save you money over time.
  • Higher interest rates than for some other mortgages. Most lenders charge lower mortgage rates on FHA, VA, and USDA loans than on conforming loans.
Read the original article on Business Insider

Powered by WPeMatico

Click to comment

You must be logged in to post a comment Login

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Most Popular

To Top