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The term conforming loan became popular after 1970 whenever Freddie Mac and Fannie Mae worked together to create standardized loan documents and processes. If a loan fits the criteria that are set forth by Freddie Mac and Fannie Mae, it is known as a conforming loan.
In order to be qualified as a conforming loan, the mortgage loan will have to be under a certain amount of money. Currently, it has to be less than $417,000 in order to qualify as a conforming loan. If the loan is above $417,000, it would be classified as a jumbo loan.
When it comes to lending, lenders prefer to work with conforming loans. By comparison, jumbo loans are much more risky for the lender. This means that they are going to have to charge a higher amount of interest for non-conforming loans than they do with conforming ones.
If you are a borrower, you want to get a mortgage that is considered to be a conforming loan. This will lower the amount of interest that you have to pay when compared to a non-conforming loan.
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