Conforming loans are a category of conventional mortgage loans that adhere to specific lending guidelines established by government-sponsored entities, primarily the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). These guidelines typically encompass loan amount limits, credit score requirements, debt-to-income ratios, and other qualification criteria. Conforming loans are subject to maximum loan amount limits set by Fannie Mae and Freddie Mac, which can vary by location. These limits aim to ensure that the loans are accessible to a broad range of borrowers. Standardized lending criteria, including credit score requirements, down payment minimums, and debt-to-income ratios, help maintain consistency in the mortgage market. Conforming loans are attractive to lenders because they can be sold in the secondary mortgage market to Fannie Mae and Freddie Mac, allowing lenders to free up capital for more lending. This liquidity benefits the overall mortgage market.
