What is a Conventional home loan?

A conventional home loan is not guaranteed by a government organization, such as the Federal Housing Administration or the Department of Veterans Affairs. The qualifying criteria for a government-backed loan and a conventional loan aren’t much different, but conventional loans are likely to be harder to get and more stringent on qualifications.

CONVENTIONAL 97

The Conventional 97 program is available to all U.S. homeowners via Fannie Mae and Freddie Mac.

It’s a true, three-percent-downpayment mortgage program, for which the 3% downpayment may come as a gift. In many respects, it’s more aggressive than the FHA’s benchmark mortgage product in that guidelines are simpler and less-restrictive.

Here are some common answers to questions about the Conventional 97 mortgage.

WHAT IS A MORTGAGE LOAN LIMIT?

Loan limits are appropriately named. They are the maximum allowable loan size for a mortgage. Loan limits vary by product and region, and are specified within a loan program’s given mortgage guidelines.

For example, the Federal Housing Administration enforces specific loan limits for FHA loans and the Department of Veterans Affairs maintains specific loan limits for VA loans.

Loans which exceed an FHA loan’s local loan limit cannot be insured and loans exceeding a VA loans local limit cannot be guaranteed.

For conforming loans — loans backed by Fannie Mae or Freddie Mac — loan limits have been unchanged since 2006 when the government moved to raise the national limit to $417,000.

Conforming loans which exceed a local loan limit are commonly known as “jumbo loans”. Jumbo loans are typically not backed by Fannie Mae or Freddie Mac, and are offered by local and national banks.

Jumbo mortgage rates are sometimes higher and sometimes lower as compared to conforming ones. However, because jumbo loans are not government-backed, eligibility requirements are often more stringent.

There aren’t many low down payment options in the jumbo mortgage market; and, income and credit score requirements are often higher for jumbo loans. This is why the decision to leave the 2015 conforming loan limits unchanged is an important one.

With conforming loan limits held at $417,000 for at least one more year, homeowners using conventional programs to refinance — such as HARP — and buyers using Fannie Mae’s 3% down payment program to purchase can get access to the lowest mortgage rates possible at the largest loan size available.

CONFORMING LOAN LIMITS FOR 2015

Fannie Mae and Freddie Mac have elected to make no change to conforming loan limits for 2015. Loan limits have been unchanged since 2006, when maximum loan sizes were raised to $417,000.

Then, between 2007-2011, despite rapidly falling home values, officials moved to keep conforming loan limits as-is. This ran counter to prior government strategy, which was to raise loan limits when home values climbed; and, to lower loan limits when home values dropped.

In 2007, officials defended their inaction by citing the want to make mortgage credit available to U.S. home buyers during a crucial stage of the housing market’s recovery.

Reinforcing this point in 2009, conforming loan limits were then raised in certain “high-cost” areas nationwide; areas in which the median home sale price handily exceeded the national average.

The government designates 234 high-cost areas nationwide including New York City, New York; Los Angeles, California; and the entire San Francisco-San Jose-Oakland metropolitan region.

No U.S. counties experienced a decline in conforming loan limits for 2015.

The baseline, non-high-cost conforming loan limits for 2015 were :

1-unit home : $417,000
2-unit home : $533,850
3-unit home : $645,300
4-unit home : $801,950

High-cost conforming loan limits range up to $625,000 for a one-unit home; $800,775 for a two-unit home; $967,950 for a three-unit; and $1,202,925 for a four-unit. In Hawaii, loan limits are even higher.

LOAN LIMITS INCREASE IN 46 COUNTIES

The national 2015 conforming mortgage loan limits remain unchanged from 2014, but there were 46 U.S. counties in which local mortgage loan limits were increased.

These are areas in which the median home sale price increased last in 2014. These counties are now considered “high-cost”.

5 counties in Massachusetts (Essex County, Middlesex County, Norfolk County, Plymouth County, and Suffolk County) received a $47,500 raise in their local conforming loan limit.

Along with the $47,500 increase granted to New Hampshire’s Rockingham County and Strafford County, these were the largest annual increases nationwide.

Ventura County, California received a modest increase of $5,750.

A complete list of the U.S. counties granted an increase to their 2015 local conforming loan limits, with a comparison against 2014 loan limits, follows:

Monterey County, California Loan Limit 2015: $502,550 (2014: $483,000)
Napa County, California Loan Limit 2015: $615,250 (2014: $592,250)
San Diego County, California Loan Limit 2015: $562,350 (2014: $546,250)
Ventura County, California Loan Limit 2015: $603,750 (2014: $598,000)
Adams County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Arapahoe County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Boulder County, Colorado Loan Limit 2015: $456,550 (2014: $417,000)
Broomfield County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Clear Creek County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Denver County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Douglas County, Colorado Loan Limit  2015: $424,350 (2014: $417,000)
Elbert County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Gilpin County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Jefferson County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Park County, Colorado Loan Limit 2015: $424,350 (2014: $417,000)
Essex County, Massachusetts Loan Limit 2015: $517,500 (2014: $470,350)
Middlesex County, Massachusetts Loan Limit 2015: $517,500 (2014: $470,350)
Norfolk County, Massachusetts Loan Limit 2015: $517,500 (2014: $470,350)
Plymouth County, Massachusetts Loan Limit 2015: $517,500 (2014: $470,350)
Suffolk County, Massachusetts Loan Limit 2015: $517,500 (2014: $470,350)
Anne Arundel County, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Baltimore city, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Baltimore County, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Carroll County, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Harford County, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Howard County, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Queen Anne’s County, Maryland Loan Limit 2015: $517,500 (2014: $494,500)
Rockingham County, New Hampshire Loan Limit 2015: $517,500 (2014: $470,350)
Strafford County, New Hampshire Loan Limit 2015: $517,500 (2014: $470,350)
Cannon County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Cheatham County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Davidson County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Dickson County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Hickman County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Macon County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Maury County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Robertson County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Rutherford County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Smith County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Sumner County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Trousdale County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Williamson County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
Wilson County, Tennessee Loan Limit 2015: $425,500 (2014: $417,000)
King County, Washington Loan Limit 2015: $517,500 (2014: $506,000)
Pierce County, Washington Loan Limit 2015: $517,500 (2014: $506,000)
Snohomish County, Washington Loan Limit 2015: $517,500 (2014: $506,000)

All other U.S. counties are bound by the $417,000 local loan limit established for 2015 for single-family homes.

DOES YOUR LOAN EXCEED CONFORMING LOAN LIMITS?

Not everyone’s mortgage will fit within the 2015 conforming loan limits.

The good news is that homeowners and home buyers whose loan size exceeds conforming loan limits can still get financed. There are several home loan options. One such option is to get an FHA-backed loan.

FHA loans are loans insured by the Federal Housing Administration and loan limits for FHA loans can be higher than for a comparable conventional loan. In high-cost areas, the FHA will insure a loan up to $625,500.

FHA loans allow for low down payments of just 3.5 percent and the agency is often more flexible with its loan approvals than either Fannie Mae or Freddie Mac.

Via its FHA Back to Work program, for example, the FHA will allow loans for a home buyer who is just 12 months removed from a bankruptcy, foreclosure or short sale. You can’t do that with a conventional loan.

Borrowers over the conforming loan limit can use VA loans, too.

VA loans are loans guaranteed by the Department of Veterans Affairs. Like FHA loans, VA loans can be made at larger sizes than conforming ones. However, VA loans are available to military borrowers only.

Among the remaining ways to get financed are USDA loans for homes in non-urban city centers; and jumbo and private loans made by local and retail banks.

Conforming Loans

2015 LOAN LIMITS: 10TH YEAR AT $417,000

2015 conforming loan limits are set at $417,000 for a single-family home, which is the same as the prior-year levels, dating back to 2006.

Leaving mortgage loan limits unchanged helps existing U.S. homeowners to refinance; and gives today’s home buyers access to government-backed home loans with low mortgage rates.

Effective from January 1, 2015, loan limits apply to conventional mortgages nationwide, including purchase loans and refinance transactions. FHA loan limits and VA loan limits may be different by county.

Find your 2015 local conforming loan limit and get an instant mortgage rate quote. Rates are available online at no cost and with no obligation to proceed. Your social security number is not required to get started.