Conforming Loan Limits … what’s it all about?

Fannie Mae and Freddie Mac each year set criteria on what constitutes a conforming loan. Criteria include debt-to-income ratio limits and documentation requirements. The maximum loan amount is set based on the October-to-October changes in mean home price, above which a mortgage is considered a jumbo loan, and typically has higher rates associated with it. This is because both Fannie Mae and Freddie Mac only buy loans that are conforming, to repackage into the secondary market, making the demand for a non-conforming loan much less. By virtue of the laws of supply and demand, then, it is harder for lenders to sell the loans, thus it would cost more to the consumers (typically 1/4 to 1/2 of a percent.)

MARCH 6, 2008: NEW CONFORMING LOAN RATES ARE HERE!

Old Conforming Loan Limits below

Year
	Single Family
2008	$ 417,000
2007	$ 417,000
2006	$ 417,000
2005	$ 359,650
2004	$ 333,700
2003	$ 322,700
2002	$ 300,700
2001	$ 275,000
2000	$ 252,700
1999	$ 240,000
1998	$ 227,150
1997	$ 214,600
1996	$ 207,000
1995	$ 203,150
1994	$ 203,150
1993	$ 203,150
1992	$ 202,300
1991	$ 191,250
1990	$ 187,450
1989	$ 187,600
1988	$ 168,700
1987	$ 153,100
1986	$ 133,250
1985	$ 115,300
1984	$ 114,000
1983	$ 108,300
1982	$ 107,000
1981	$ 98500
1980	$ 93750
Limits for Alaska, Hawaii, Virgin Islands and Guam are 50% higher. Virgin Islands was designated a high cost area in 1992 and Guam in 2001.Prior to 1984, second mortgage limits were the same as first mortgage limits. Subsequent legislation reduced the limits to 50% of first mortgage limits. Fannie Mae had no second mortgage program before 1981.

2008 Economic Stimulus Bill

A temporary increase in the Conforming Loan Limits for high-cost areas of living has been incorporated into the 2008 economic stimulus package. Congress has authorized an increase of the single family residences limits to the lesser of $729,750 or 125% of the average home value within the metropolitan statistical area (MSA). However, neither Fannie Mae nor Fredie Mac are required to offer loans to those limits.

The bill was signed into law by President Bush on February 13, 2008.^[3]

^Wikipedia