As housing prices continue to climb, an increasing number of Americans are becoming acquainted with conforming loan limits, the figures that differentiate the most prevalent loan types from jumbo loans. These limits are subject to annual adjustments and vary according to geographical regions.

The conforming loan limit is determined annually by the Federal Housing Finance Agency (FHFA). Mortgages falling within this limit and meeting specific criteria are eligible for purchase by Fannie Mae and Freddie Mac, entities that predominantly acquire and sell the majority of home loans in the United States to investors in the secondary market.

Jumbo loans, which exceed the conforming limit, cannot be acquired by Fannie Mae and Freddie Mac. In 2024, the threshold for much of the U.S. stands at $766,550, reflecting a roughly 6 percent increase from the 2023 limit of $726,200. In high-cost housing markets, such as California, New York City, the District of Columbia, Alaska, and Hawaii, the limit is $1,149,825, up from $1,089,300 in 2023. Other markets fall in between these extremes, like Boulder County in Colorado, where the 2024 conforming loan limit is $856,750, or Monroe County in Florida, home to the Keys, with a limit of $929,200. In the Nashville, Tennessee market, it’s $943,000.

Conforming loan limits adjust based on the FHFA’s House Price Index, increasing as home prices rise. If your mortgage is below the conforming loan limit, it falls into the conforming loan category. Beyond that amount, the next option is a jumbo loan, which, due to a smaller market than conforming loans, may require more effort to secure. Jumbo loans typically demand higher credit scores and down payments compared to conforming loans.

Before opting for a mortgage exceeding the conforming loan limit, consider that while a jumbo loan provides greater buying power, it comes with higher interest payments due to the larger balance. Although recent trends show slightly lower jumbo mortgage rates compared to conforming rates, qualifying for a jumbo loan necessitates a higher credit score, potentially a higher income, and more assets than what is required for a conforming loan. While some lenders may accept credit scores as low as 660 for jumbo loans, most prefer scores of 700 or higher. For conventional conforming loans, the minimum credit score is typically 620.

Contact Universal Capital Mortgage Corporation to learn more about Conforming Loans!