What are Conventional Loan Limits?

Conventional loan limits represent the maximum mortgage value allowed on single-family homes in the United States. These limits may change yearly, or they may remain stable for years at a time. Conventional loans differ from other types of loans in terms of their backing. Some loans are guaranteed by the federal government, through such agencies as the Federal Housing Administration (FHA) and the Veterans’ Administration. Conventional loans are not guaranteed or insured by the government.

Conventional loan limits may differ for those who do not live in the 48 contiguous United States. Those who live in Alaska, Hawaii, the Virgin Islands or Guam may qualify for higher loan limits. Additionally, those who opt to purchase multifamily dwellings may qualify for larger loan limits as well.

To understand the monetary difference between conventional loan limits for single-family and multifamily homes, consider their history. At one point, the maximum loan value for a single-family mortgage was $417,000 US Dollars (USD). In that same year, the maximum limit for a two-family property was $533,850 USD; the limits for three- and four-unit properties were $645,300 USD and $801,950 USD, respectively. Limits also differ for those seeking second mortgages rather than initial loans for real estate.

To add to the confusion some people feel when trying to understand conventional loan limits and other mortgage limits, there are both conforming and non-conforming conventional loans. A conforming loan is one that follows Fannie Mae’s and Freddie Mac’s guidelines. Fannie Mae is a government-sponsored corporation that purchases and pools mortgages. Freddie Mac, also government-sponsored, buys mortgages and sells them. A loan is said to be non-conforming if it does not meet these guidelines; however, such a loan is still considered a conventional loan.

Sometimes people require mortgage loans far above the maximum loan value that has been set by Freddie Mac or Fannie Mae. In such a case, a person could apply for a jumbo loan. These loans may have stiffer qualification requirements and typically have much higher interest rates as well. In the past, conventional loans were a consumer’s only option. These loans were granted by traditional sources, such as banks, credit unions, and savings and loan companies. Today, borrowers have many other choices and can often find loans at lower rates and offering friendlier terms.