Short answer. Conforming loans are mortgages at or below the FHFA's annual loan limit ($806,500 in 2025 standard areas), eligible for purchase by Fannie Mae or Freddie Mac. Jumbo loans exceed this limit and are held in lender portfolios or securitized through private-label MBS.
The conforming/jumbo distinction is one of the most consequential in U.S. mortgage finance. It determines who can fund the loan, what underwriting standards apply, and what pricing the borrower receives.
Conforming loans
A conforming loan meets all of the following criteria:
- Loan amount ≤ FHFA conforming limit ($806,500 baseline; $1,209,750 high-cost areas in 2025)
- Compliant with Fannie Mae/Freddie Mac underwriting standards (debt-to-income, credit score, documentation)
- Eligible for purchase by Fannie Mae or Freddie Mac, then securitized into agency MBS
Conforming loans typically offer the lowest mortgage rates — usually 30-50 basis points below jumbo rates — because of the GSE guarantee and deep MBS liquidity.
Jumbo loans
A jumbo loan exceeds the FHFA conforming limit. Examples: a $1.5M loan in a non-high-cost area, or a $1.3M loan in a high-cost area. Jumbo loans are held by:
- Bank portfolios (~60% of jumbos)
- Private-label MBS (~30%)
- Insurance-company portfolios (~10%)
Jumbo underwriting is typically tighter than conforming: 700+ FICO, 20%+ down, 12 months of reserves typical.
The high-cost area exception
FHFA allows higher conforming limits in designated high-cost areas (most of California's coastal counties, the New York metro, Washington DC, parts of Hawaii). The 2025 high-cost limit of $1,209,750 covers about 230 U.S. counties and roughly 25% of the U.S. population.
Sources
U.S. Census Bureau Survey of Construction; National Association of Realtors Existing Home Sales report; Freddie Mac Primary Mortgage Market Survey; National Bureau of Economic Research Business Cycle Dating Committee.