Conforming loans are typically what brokers refer to as A paper loans for A borrowers.

Conforming loan amount limits may change from year to year. As of 2006 the conforming loan amount limit is $417,000.00 anything over that amount is usually considered a jumbo loan.

Besides setting the Conforming Loan Limits, Fannie Mae (FNMA) and Freddie Mac (FHLMC) also limits the type of homes used as collaterals for Conforming Loans. For a loan to be Conforming (eligible for delivery to Fannie Mae and Freddie Mac), the property used to secure the mortgage has to be a Single Family Residence, 2 family, 3 family, 4 family residence, condominium, cooperative, or Planned Unit Development. Loans that are secured by Mixed-use (residential homes with a commercial unit) and properties with more than four units are considered Non-conforming.

Conforming loans are the lowest available interest rates for home financing.

Conforming loans are easier to sell to investors.

One- to four- family mortgages in Alaska, Hawaii, Guam, and the U.S. Virgin Islands are 50 percent higher than the conforming limits for the rest of the country.

Loan amounts higher than conforming loan limits are considered jumbo loans.

Single-Family Mortgage Conforming Loan Limits effective January 1, 2006:
First mortgages
•One-family loans: $417,000
•Two-family loans: $533,850
•Three-family loans: $645,300
•Four-family loans: $801,950

Conforming limits for second mortgages
•$208,500
•In Alaska, Hawaii, Guam, and the U.S. Virgin Islands: $312,750

The $57,350 increase in conventional loan limits comes at an opportune time, as the interest rates have been creeping up since last August. A 30 year conforming loan at 6.25% versus a non-conforming (jumbo) loan at 6.75% would increase the monthly payment by $138, enough to pay for that MP3 player you wish you got at Christmas!