What is Conforming Mortgage?

Conforming mortgage is a home loan that is eligible to be sold to the
Federal National Mortgage Association (Fannie Mae) or the Federal
Home Loan Mortgage Corporation (Freddie Mac).  More on Fannie
Mae and Freddie Mac.

What is Non-conforming Mortgage?

Nonconforming loans are mortgages that fall outside of FNMA and
FHLMC acceptable guidelines, such as low credit scores, or
unacceptable property types.  However, most are non-conforming
because the loan amounts are higher than those set by Fannie Mae
and Freddie Mac.  Nonconforming loans larger than the conforming
loan limits are called "Jumbo" loans.

Why Conforming Mortgage?

Whether fixed rate or adjustable, 15-year term or 30, conforming
loans traditionally have the lowest interest rates available on the
home finance market.

What is Conforming Mortgage Rate?

Fannie Mae and Freddie Mac do not set the interest rates for
conforming mortgages.  They only set the guidelines for conforming
loan products.  Individual banks set their own conforming mortgage
interest rates and fees.  

Why do Conforming Loans have the lowest rates?

Because banks can sell conforming mortgages to Federal National
Mortgage Association and the Federal Home Loan Mortgage
Corporation and immediately recoup their funds, they are not limited
by their market sizes or capital strength when it comes to making
conforming home loans.  Small neighborhood banks can compete
with large international banks, thereby making conforming mortgage
rates the lowest in the mortgage arena.

Non-conforming mortgages, on the other hand, are either kept in the
banks' investment portfolio for the length of the loan term, or are sold
to other investors on the secondary market.  However, these investors
are not readily available compared to Fannie Mae and Freddie Mac.  
Banks charge higher interest rates to compensate for the fact that
they might have to hold on to the mortgages for 30 years to recoup
their investments.
Conforming Loan Rates
This is the Freddie Mac
weekly survey of the
average mortgage rates of
various conforming loan
products.  As opposed to
other websites and
surveys that may be
influenced by their quests
for advertisement
revenues, Freddie Mac
does not depend on ad
revenues.  For this reason
we believe the Freddie Mac survey is unbiased and