What Are Conforming Loan Limits
Conforming loan limits determine the maximum loan amount Fannie Mae can purchase. These limits exist because of Fannie Mae's federal charter and change annually based on housing price data. Think of them as the ceiling for conventional loans that can be sold to Fannie Mae.
The limits serve two purposes. First, they define which loans qualify as "conforming" versus "jumbo" loans. Second, they ensure Fannie Mae focuses on typical homebuyer transactions rather than luxury purchases.
Say you want to buy a $600,000 home in Denver with 10% down. Your loan amount would be $540,000. If the conforming limit in Denver is $550,200, your loan qualifies. If the limit is $484,350, you need a jumbo loan instead.
How Loan Limits Vary by Location and Property Type
Fannie Mae sets two types of limits: baseline limits and high-cost area limits. Baseline limits apply to most of the country. High-cost area limits apply to expensive markets where baseline limits would exclude too many borrowers.
The Federal Housing Finance Agency determines which areas qualify as high-cost based on median home prices. Counties like San Francisco, Manhattan, and parts of Hawaii typically have high-cost area limits.
Limits also increase with the number of units in the property:
- Single-family homes have the base limit
- Duplexes have higher limits
- Three-unit properties have even higher limits
- Four-unit properties have the highest limits
For example, if the baseline limit for a single-family home is $484,350, the limit for a duplex might be $620,200 in the same area.
Where to Find Current Loan Limits
Fannie Mae publishes current loan limits on their website, updated annually. The limits typically increase each year to reflect rising home prices, though they can stay flat or decrease in some markets.
Your lender should verify the correct limit for your specific property location and type. The limit that applies is based on where the property sits, not where you live or work.
For condos and co-ops, special rules apply. Co-op loans include both your individual loan and your share of the building's underlying mortgage, and the combined amount cannot exceed the loan limit.
High-Balance Loans and Special Requirements
Loans that exceed baseline limits but stay within high-cost area limits are called "high-balance" loans. These loans face stricter requirements than standard conforming loans.
High-balance loans typically require higher credit scores, lower debt-to-income ratios, and more cash reserves. The exact requirements depend on your loan-to-value ratio and other risk factors.
If you need a high-balance loan, expect your lender to scrutinize your application more carefully. The underwriting process may take longer, and you might need additional documentation to prove your ability to repay.
Original Loan Amount Rules
Loan limits apply to your original loan amount at closing, not your current balance. This matters for refinances and loan modifications.
Say you took out a $500,000 loan in 2019 when the limit was $484,350. Your loan exceeded the limit then, making it a jumbo loan. Even if you pay it down to $450,000 and current limits rise to $550,000, it remains a jumbo loan for Fannie Mae purposes.
This rule prevents borrowers from converting jumbo loans to conforming loans simply by making payments or benefiting from limit increases.
Loan Modifications and Limit Complications
Modified loans face special scrutiny under loan limit rules. If your original loan amount exceeded the conforming limit when you first got the mortgage, Fannie Mae cannot purchase it even after modification.
This creates problems for borrowers who got jumbo loans before the financial crisis and later needed modifications. Even if their current balance falls below today's conforming limits, the loans remain ineligible for Fannie Mae purchase.
Lenders must verify the original loan amount, not just the current balance, when considering whether to modify a loan they plan to sell to Fannie Mae.
What Documents Lenders Need
Your lender must verify the loan amount stays within limits before closing. They need your purchase contract or refinance documents showing the exact loan amount.
For co-op purchases, lenders need additional documentation showing your share of the building's underlying mortgage. This requires co-op financial statements and recognition agreements.
The lender also needs to confirm the property's exact location to apply the correct limit. A property just across a county line might have a different limit, affecting your loan eligibility.
Common Gotchas and Complications
Borrowers often assume loan limits apply to the purchase price, but they apply to the loan amount. A $500,000 purchase with $100,000 down creates a $400,000 loan, which might fit within limits even if the purchase price seems high.
Property lines matter more than you might think. A home that sits in two counties follows the limit for the county containing the majority of the property. Your lender needs to verify this carefully.
Timing can create problems too. If you lock your rate but limits decrease before closing, your loan might become ineligible. This rarely happens, but it occurred in some markets after the 2008 financial crisis.
For investment properties and second homes, some lenders apply more conservative internal limits even when Fannie Mae limits would allow higher amounts. Ask your lender about their specific policies for non-owner-occupied properties.
References
For the official guidelines, see B2-1.5-01: Loan Limits in the Fannie Mae Selling Guide.
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Fannie Mae and Freddie Mac update their rules several times a year. Get notified when changes affect your mortgage eligibility, required documents, or loan terms.
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Original Fannie Mae Guideline Text
Overview
Fannie Mae can only purchase loans up to a certain dollar amount. This dollar amount is known as the conforming loan limit. Fannie Mae’s loan limits are imposed under its federal charter as amended by law.
The loan limits apply to all conventional loans delivered to Fannie Mae for whole loan purchase or MBS pool issuance and are based on the original loan amount of the loan (irrespective of the origination date). The limits are subject to change annually and vary, depending upon the number of units in the property and the property’s location. The conforming loan limits are posted on Fannie Mae's website.
Lenders are responsible for ensuring that the original loan amount of each loan does not exceed the applicable maximum loan limit for the specific area in which the property is located at the time the loan is delivered to Fannie Mae.
Loan Limits Defined
Fannie Mae’s first mortgage loan limits are defined in terms of baseline (also known as "general") loan limits and high-cost area loan limits:
The baseline limits apply to the majority of the loans that Fannie Mae purchases.
The high-cost area loan limits apply to loans secured by properties in designated high-cost areas, as determined by Fannie Mae’s regulator. The high-cost area loan limits vary across the country.
High-balance loans are subject to the high-cost area loan limits. Fannie Mae’s eligibility and delivery requirements may vary for high-balance loans. See Chapter B5-1, High-Balance Mortgage Loans for additional information.
If the loan is a first lien securing an ownership interest in a co-op corporation, the amount of the first lien and prorated share of the co-op corporation blanket mortgage cannot exceed Fannie Mae’s loan limits.
Fannie Mae has no minimum original loan amount requirement for either whole loans or MBS loans.
Loan Limits and Modified Loans
Loan limits for modified loans are based on the original loan amount of the loan and not on the unpaid principal balance of the loan at the time of modification or acquisition by Fannie Mae. A modified loan with an original loan amount exceeding the current loan limit is not eligible for purchase by Fannie Mae, even though the balance at the time of the modification may be at or below the current applicable loan limit.
