Prime Conforming

You’ve got on all the right things: the perfect shirt, perfect pants, and perfect shoes. Even the perfect laptop. “Perfect” as in conforming...but not prime conforming. You need a house for that.

Prime conforming describes mortgages that are given to special borrowers: ones with high credit. The “prime” in prime conforming is referencing this prime sector of the debtor market. They’re prime to banks because they’re expected to pay their mortgage back without a problem. If they can’t, who can?

The “conforming” part of prime conforming refers to the loan’s size. It’s conforming if it’s small enough to fit within the conforming loan limits. The Office of Federal Housing Enterprise Oversight (OFHEO) sets the conforming loan limits. Fannie Mae and Freddie Mac, the government-ish agencies, only deal in conforming loans. Most places nowadays have a conforming loan limit of under $500k, but some more expensive areas (like Alaska and Hawaii) get a higher limit.

What about non-conforming loans? Those are super-big mortgages called jumbo loans. Jumbo loans have their own special set of requirements. Since jumbo loans are such large amounts of money, they’re considered riskier, and thus come with higher interest rates, and stricter terms and qualifications.

Prime conforming is the bank’s fave mortgage customer, and is the best deal a borrower can get: great credit within conforming limits means easy qualification and super-low rates.