How Do Super Conforming Loans Work?

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, super conforming loans allow you to access higher loan limits in high-cost areas.

What Are Super Conforming Loans?

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.

It’s easier to understand super conforming loans within the context of a conforming mortgage. A conforming loan (also known as a conventional loan) is any loan that’s backed by the government-sponsored enterprises Fannie Mae or Freddie Mac.

Fannie Mae and Freddie Mac created these loan options to help in areas where home prices are higher. This allows buyers to find more willing sellers and vice versa.

How Super Conforming Loans Work

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

Super Conforming Loan Limits

Nationwide, the standard loan limit for conforming loans is $766,550 (as of 2024). 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 $1,149,825. These limits apply to single-unit properties. Homes with multiple units have higher limits.

Conforming Loan Limits And The FHFA

The current process for setting conforming loan limits was put in place as part of the Housing and Economic Recovery Act of 2008. 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.

National Conforming Loan Limits

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 Mortgage Loan Rates

As with most types of home loans, mortgage rates for super conforming mortgages may differ depending on your lender, your credit score and your debt-to-income ratio (DTI). Typically, to qualify for a super conforming mortgage, lenders prefer a credit score of 800 or higher and a DTI ratio of 43% or lower.

With super conforming loans, you’ll likely have the option to choose a fixed-rate or an adjustable-rate mortgage (ARM). A conforming fixed loan will have a set interest rate for the life of the loan, while an ARM rate can change with the market.

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). Federal Housing Administration (FHA) loans have their own county loan limits, while the Department of Veterans Affairs (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 those of 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.

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 your best option for homeownership.

Here are a couple of key differences between jumbo loans and super conforming loans:

Down Payments

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 for a single-unit home. 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%.

Qualifications

Stricter qualification requirements apply to jumbo loans. For example, to buy a home with a jumbo loan, you need a 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 the approval process started online with Rocket Mortgage.