Conforming Loan Limit

Currently, for most of the country, the maximum limit for mortgage loan is $417,000. This limit is typically increased each year by the level of home-price inflation. The conforming loan maximum is the largest loan that can be purchased by mortgage giants Fannie Mae or Freddie Mac. Loans larger than the maximum, known as jumbo loans, typically carry higher interest rates.

According to a statement released by the Office of Federal Housing Enterprise Oversight (OFHEO), the maximum conforming loan limit for U.S. mortgages will be frozen at current levels for a year, and then adjusted for 2008, if home prices show a decline from October 2005 to October 2006. Such a decline in price appears likely this year as the September number showed a 3.1% decrease.

The October price data will be published Nov. 28. If prices rise year-over-year, then the maximum loan limit for 2007 would be raised as usual. Any mortgages previously purchased or guaranteed under a higher limit should not be affected by any reduction of the limit. But households and lenders who are making decisions today may get affected by the limit put in effect next January.