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How Do Super Conforming Loans Work?

Jul 13, 2023



If you're looking to buy in an area where home prices are higher, you might need a slightly bigger mortgage loan to make your homeownership dreams come true. There are jumbo loans, but these often come with stricter guidelines and a higher down payment. Fortunately, there are super conforming loans that allow you to access higher loan limits in high-cost areas.

This article will go over everything you need to know about super conforming loans, how they work and how they compare with jumbo loans.

What Are Super Conforming Loans?

It's easier to define super conforming loans if you start with the context of a conforming mortgage. A conforming loan (aka conventional loan) is any loan that's backed by the government-sponsored enterprises Fannie Mae or Freddie Mac. However, the key difference here is the loan limit itself.

Super conforming loans, which may also be referred to as high-cost or high-balance mortgages, are loans with higher loan limits specifically designed for areas where market demand has led to high home prices.

Fannie Mae and Freddie Mac created these loan options in order to help smooth the functioning of the housing market in areas where home prices tend to be a bit higher. This allows buyers and sellers to be able to find more willing participants for the other side of the transaction.

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How Super Conforming Loans Work

Super conforming loans differ from conforming loans in a couple notable ways.

Super Conforming Loan Limits

Nationwide, the standard loan limit for conforming loans is $726,200 (as of 2023). In high-cost areas, loan limits are set specifically for the county. In the highest-cost areas, as well as the states of Alaska and Hawaii, the top super conforming loan limit is $1,089,300. These are the limits for single-unit properties. Homes with multiple units have higher limits.

The current process for setting conforming loan limits was put in place as part of the Housing and Economic Recovery Act of 2008. Basically, the act requires that the Federal Housing Finance Agency (FHFA), the government entity responsible for overseeing Fannie Mae and Freddie Mac, maintain a home price index for the purposes of setting loan limits consistent with inflation levels.The national limit is based on the difference in prices between the third quarter of the current year and that of the year prior. The baseline limit is 115% of the national average home price.In areas where the local median is more than 115% of the national average, the local loan limit is set at 115% of the local median. The absolute highest the conforming loan limit can be under current regulations is 150% of the national average.

Super Conforming Loan Rates

As with most types of home loans, mortgage rates may differ depending on your lender. Typically you’ll choose either a fixed-rate or an adjustable rate mortgage (ARM), the main difference being that a conforming fixed loan will have a set interest rate for the life of the loan, whereas an ARM can change with the market.

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Do You Need A High-Balance Conforming Loan?

You'll know if you need a super conforming loan based on whether your area falls above standard conforming loan limits.

If you're curious about the conforming loan limit in your area, you can use this loan limits search engine from the Department of Housing and Urban Development (HUD). FHA loans have their own county loan limits, while the VA typically follows FHFA guidance.

Finally, a super conforming loan has the following benefits in comparison to other loan options in high-cost areas.

  • Depending on demand in the mortgage bond market, interest rates may be lower than jumbo loans. At the very least, they'll be competitive with the jumbo market.
  • You won't need multiple mortgages to finance a higher loan amount.
  • You'll have lower mortgage financing costs with a super conforming loan than you would with a jumbo loan.

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Jumbo Loan Vs. Super Conforming Loan

Jumbo loans are loans that fall above local conforming loan limits. In some areas where the median falls above 150% of the national average home price, a jumbo mortgage may be youroption for homeownership.

There are a couple of key differences when it comes to jumbo loans vs. super conforming loans. Let's run through them:

  • Required down payments are higher for jumbo loans. At Rocket Mortgage®, you'll need to put at least 10.01% down on loan amounts up to $2.5 million and one unit. If you have two units, the minimum down payment for the same loan amount is 15%. Finally, you can get a loan up to $3 million for a one unit property with 35% down. Meanwhile, for a super conforming loan, the minimum down payment is 25%.

  • Stricter qualification requirements apply to jumbo loans. For example, to buy a home with a jumbo loan, you need a meeting credit score of between 680 – 740, depending on the loan amount. Additionally, you could need up to 12 months of reserves. Although it can vary for super conforming loans, a median score of 620 and 2 months of reserves are a good general guideline.

The Bottom Line

Super conforming loans offer those interested in living in a high-cost area the opportunity for more affordable financing. High-cost areas are defined by Fannie Mae and Freddie Mac based on a formula laid out by Congress.

Super conforming loans have a couple of key advantages over jumbo loans, namely lower down payment options and looser qualification requirements. If you're looking to buy or refinance a home, it's one of several loan types to consider.

If you're looking for the best mortgage solution for you, you can get started online with Rocket Mortgage.

Headshot of Erin Gobler, freelance personal finance expert and writer for Rocket Mortgage.

Hanna Kielar

Hanna Kielar is a Section Editor for Rocket Money and Rocket Loans® with a focus on personal finance, automotive, and personal loans. She has a B.A. in Professional Writing from Michigan State University.