Understanding Conventional Loan Limits: Everything You Need to Know

Are you considering taking out a conventional loan but are not sure how much you can borrow? Look no further because this article will provide you with all the essential information about conventional loan limits. Whether you are a first-time homebuyer or a seasoned investor, understanding these limits is crucial in securing your dream home.

What are Conventional Loan Limits?

Conventional loan limits refer to the maximum amount that a borrower can obtain through a conventional mortgage loan. These limits are set by Freddie Mac and Fannie Mae, two government-sponsored entities that buy and sell mortgages in the secondary market.

These limits vary by county and are adjusted annually to reflect changes in the housing market. In 2021, the baseline loan limit for a single-family home is $548,250, while the limit for a four-unit property is $1,054,500. Keep in mind that these limits only apply to conforming loans, which means that they meet the guidelines set by Freddie Mac and Fannie Mae.

Conforming Loan Limits for 2021

Property Type
Number of Units
Baseline Limit
Single-Family Home
Four-Unit Property

How are Conventional Loan Limits Determined?

The Federal Housing Finance Agency (FHFA) sets the baseline loan limit annually based on the average home price in the previous year. If the average home price rises, the loan limit increases accordingly. However, loan limits can also vary by location and property type. Areas with higher housing costs, such as California, Hawaii, and Alaska, have higher loan limits to accommodate the expensive housing market.

Benefits of Conforming Loans

Conforming loans have several advantages over non-conforming loans, including higher loan limits, lower interest rates, and more flexible guidelines. Because conforming loans meet the criteria set by Freddie Mac and Fannie Mae, they are easier to sell in the secondary market, which enables lenders to offer lower interest rates to borrowers. Additionally, conforming loans usually require a lower down payment than non-conforming loans, making homeownership more accessible for first-time buyers.

Frequently Asked Questions

What is the difference between a conforming and a non-conforming loan?

A conforming loan meets the guidelines set by Freddie Mac and Fannie Mae, while a non-conforming loan does not. Non-conforming loans often have higher interest rates and stricter underwriting requirements than conforming loans.

Can I get a conventional loan with bad credit?

While it is possible to get a conventional loan with bad credit, it may be more challenging than getting an FHA loan or a VA loan. Borrowers with a credit score of at least 620 are generally eligible for a conventional loan, but those with a lower score may have to pay a higher interest rate or make a larger down payment.

What is a jumbo loan, and how is it different from a conforming loan?

A jumbo loan is a non-conforming loan that exceeds the loan limit set by Freddie Mac and Fannie Mae. Jumbo loans often have higher interest rates and more stringent underwriting requirements than conforming loans.


Understanding conventional loan limits is crucial in navigating the home buying process. Before you start house hunting, make sure you know the loan limits in your area and what type of loan works best for you. Remember that with a conforming loan, you can benefit from lower interest rates, higher loan limits, and more flexible guidelines.

If you have any questions or concerns, don’t hesitate to contact a licensed loan officer who can guide you through the process of securing a conventional loan.

Thank you for reading, and we wish you the best of luck in your homebuying journey!


The information provided in this article is for educational purposes only and should not be considered legal, financial, or professional advice. Always consult with a licensed professional before making any financial decision. The accuracy of the information provided is not guaranteed and may be subject to change without notice.