This is a loan type that literally conforms to the guidelines of Fannie Mae (FNMA) and Freddie Mac (FHLMC). Both of these Government Sponsored Enterprisees (GSEs) are necessary to provide liquidity to the mortgage market.
Conforming loans are essentially conventional loans that meet bank-funding criteria set by FNMA and FHLMC. Both of these stock-holding companies buy mortgage loans from lending institutions and secure them for resale to the investment community. Every year, from October through the following October, FNMA and FHLMC establish limits on what constitutes a conforming loan in a mean home price.
Buying back mortgage loans allows these agencies to provide a continuous flow of affordable funding to banks, which then reinvest their money back into additional mortgage loans.
1 Unit $417,000
2 Unit $533,850
3 Unit $645,300
4 Unit $801,950
FNMA and FHLMC only buy loans that are conforming, to repackage into the secondary market, effectively decreasing the demand for non-conforming loans.