Understanding a conforming mortgage loan

 If you are shopping for a mortgage, there are basically two different categories you can choose from.  You can look at conventional mortgages or government loans.  Conventional loans can be either a conforming or non conforming loan.  A conforming mortgage loan however has to following the terms and conditions laid out by both Fannie Mae and Freddie Mac.

Fannie Mae and Freddie Mac are two stockholder-owned corporations that purchase conforming mortgage loans.  They package the mortgages into securities which they then proceed to sell investors.  Fannie Mae and Freddie Mac establish the mortgage guidelines including maximum loan amount, credit levels required, income, down payment and suitable properties.

So if get a non-government mortgage either at or below the conventional loan limit, often set by the bank, you would be getting a conforming mortgage loan.  If your mortgage amount is above the conventional limit, this is referred to as a jumbo or non-conforming loan.  Often you will be required to pay a higher rate of interest because they are riskier.