What is a conforming loan, and how do you qualify?

Core Insights - A conforming loan is a common type of conventional mortgage that adheres to the Federal Housing Finance Agency (FHFA) loan limits and is typically backed by government-sponsored enterprises like Freddie Mac and Fannie Mae [2][11] Loan Types and Limits - The FHFA sets annual conforming loan limits, with the 2025 limit at $806,500 for single-unit dwellings in most of the U.S., and higher limits for Alaska, Hawaii, Guam, and the U.S. Virgin Islands at $1,209,750 [7] - The 2026 limits are set to increase to $832,750 for one-unit dwellings and $1,249,125 for high-cost areas [7] Qualification Criteria - To qualify for a conforming loan, borrowers typically need a minimum credit score of 620, a down payment of at least 3%, and must meet specific debt-to-income (DTI) ratio requirements, which can be as high as 50% under certain conditions [5][12] Comparison with Non-Conforming Loans - Non-conforming loans differ from conforming loans by offering more flexibility in borrowing limits and payment schedules, and they are not backed by Freddie Mac or Fannie Mae [5] - Jumbo loans are a type of non-conforming loan for larger amounts, requiring higher credit scores and proof of affordability [6] Advantages and Disadvantages - Conforming loans generally offer lower interest rates compared to jumbo loans, and many lenders allow a lower down payment of 3% [16] - However, borrowers cannot finance homes above the FHFA's conforming loan limits, necessitating a jumbo loan for higher-priced properties [16]