Conforming Loans - Conventional home mortgages eligible for sale and delivery to either the Federal National Mortgage Association (FNMA) or the Federal Home Loan Mortgage Corporation (FHLMC). These agencies generally purchase first mortgages up to loan amounts mandated by Congressional directive

Conforming loans are typically what brokers refer to as A paper loans for A borrowers.

Conforming loan amount limits may change from year to year. As of 2006 the conforming loan amount limit is $417,000.00 anything over that amount is usually considered a jumbo loan.

Besides setting the Conforming Loan Limits, Fannie Mae (FNMA) and Freddie Mac (FHLMC) also limits the type of homes used as collaterals for Conforming Loans. For a loan to be Conforming (eligible for delivery to Fannie Mae and Freddie Mac), the property used to secure the mortgage has to be a Single Family Residence, 2 family, 3 family, 4 family residence, condominium, cooperative, or Planned Unit Development. Loans that are secured by Mixed-use (residential homes with a commercial unit) and properties with more than four units are considered Non-conforming.

Conforming loans are the lowest available interest rates for home financing.

Conforming loans are easier to sell to investors.

One- to four- family mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands are 50 percent higher than the conforming limits for the rest of the country.

Loan amounts higher than conforming loan limits are considered jumbo loans.

Single-Family Mortgage Conforming Loan Limits effective January 1, 2006:
First mortgages
•One-family loans: $417,000
•Two-family loans: $533,850
•Three-family loans: $645,300
•Four-family loans: $801,950

Conforming limits for second mortgages
•$208,500
•In Alaska, Hawaii, Guam, and the U.S. Virgin Islands: $312,750

New 2006 Conforming Loan Limits - For the year 2006, Conforming loan limits look like this:

For conventional mortgages (those which may be purchased from local lenders by national organizations such as Fannie Mae and Freddie Mac), the loan limits for owner-occupied properties are:

* One-unit properties: $417,000

* Two-unit properties: $533,850

* Three-unit properties: $645,300

* Four-unit properties: $801,950

* For properties in Alaska, Hawaii, Guam, and the U.S. Virgin Islands, the loan limits are 50 percent higher.

In the world of residential mortgages, these loan limits are very important. Loans with a loan amounts that exceed these limits are considered Nonconforming loans, and always carry higher interest rates. To avoid paying higher interests, homeowners in need of mortgages with non-conforming loan amounts should enlist the assistance of mortgage professionals to structure their financing to keep the loans within Conforming limits.

One way to structure a non-conforming loan amount of $500,000, for example, is to do a first conforming loan in the amount of $417,000 with a second loan in the amount of $83,000. That way, $417,000 will be financed at the most favorable interest rate available.

Borrowers who are presently paying Jumbo loan rates but now have their mortgage balances fall into the conforming limits may want to look into refinancing. A qualified mortgae professional can help you in determining if there is a benefit in refinancing.

One of the most popular loans used to stay within the conforming guidelines is the combination loan known as the 80/20 combo. You have an 80% first loan with a 20% second. There are variations such as the 80/10/10 where the buyers is putting down 10%. For instance if you have a purchase price of 500,000 - 80% of that would be 400,000 for the first mortgage and keep you within the guidelines of conforming loans.

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