I originally had this piece published in 2013 and the question it addressed is still one of the most common questions I answer even today: "What is a conforming loan?" The answer is deceptively simple.
A conforming loan is a loan that conforms to Fannie Mae and Freddie Mac guidelines.
The answer, hopefully, leads to several additional questions, and so I wanted to explain briefly what a conforming loan is and what makes a loan conforming.
A Brief History
In 1970, the Federal National Mortgage Association (FNMA, nicknamed Fannie Mae), was authorized by the United States government to purchase residential mortgage loans. Fannie Mae worked with the Federal Home Loan Mortgage Corporation (FHLMC, or Freddie Mac) to develop consistent criteria, guidelines and documents to package home loans that would be known as a conforming loan.
If you want further information about what exactly Fannie Mae and Freddie Mac do with these conforming loans once they buy them and why they buy them, please contact me, my contact info will be found someplace around here… I will be thrilled to talk your head off about Fannie, Freddie, mortgage-backed securities, and how every real estate transaction done since 1970 depends on the conforming loan.
Onward and forward.
The Definition
In the United States, a conforming loan is a mortgage loan that conforms to GSE (Fannie Mae and Freddie Mac) guidelines. The most well-known guideline is the size of the loan. Other guidelines include the borrower's loan-to-value ratio (the size of down payment), debt-to-income ratio, credit score and history, and documentation requirements.
In general, any loan which does not meet guidelines is a non-conforming loan. A loan which does not meet guidelines specifically because the loan amount exceeds the guideline limits is known as a jumbo loan.
2025 Conforming Loan Limits: What Buyers Need to Know
As of January 1, 2025, the Federal Housing Finance Agency (FHFA) has announced updated conforming loan limits that represent a significant increase for homebuyers across the country.
Base Conforming Limit: The base conforming limit for one-unit properties is now $806,500, an increase of $39,950 (or 5.2 percent) from 2024's limit of $766,550. This increase reflects the rise in average U.S. home prices, as FHFA's seasonally adjusted house price index data indicate that house prices increased 5.21 percent between the third quarter of 2023 and 2024.
High-Cost Area Ceiling: For properties located in designated high-cost areas, the maximum conforming loan limit is $1,209,750, which is 150 percent of the baseline limit. These high-cost areas are determined by a formula established under the Housing and Economic Recovery Act (HERA), which sets limits in counties where 115 percent of the local median home value exceeds the baseline conforming loan limit.
Multi-Unit Properties: Conforming loan limits also increase for two-, three-, and four-unit properties, with 2025 limits of $1,032,650, $1,248,150, and $1,551,250 respectively in the lower 48 states.
Special Provisions: Special statutory provisions establish different loan limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limits for one-unit properties are $1,209,750.
Why This Matters to Homebuyers
This is critical to remember: a conforming loan carries a lower interest rate than a non-conforming (jumbo) loan, which translates into more favorable financing terms and significant savings over the life of the mortgage.
The conforming loan limits are fluid. The limits increase or decrease annually depending on changes in the Housing Price Index. The FHFA adjusts these limits every November based on methodology established by HERA. Whenever the conforming loan limits change, it represents a significant development for the housing market.
Resources for County-Specific Limits
For your specific county's conforming loan limits, which vary across the United States, you can access:
- FHFA's interactive conforming loan limit values map, showing 2025 limits by county and county equivalent
- FHFA's full county-by-county loan limit list for all areas of the United States
