High Balance Conforming Loans: Everything You Need to Know

If you’re looking to buy a home in a high-cost area, you may run into issues with conforming loan limits. Luckily, high balance conforming loans provide higher lending limits so you can still qualify for a conventional loan

A high balance conforming loan is a type of conventional loan that allows for loan amounts between the baseline conforming loan limit and the maximum limit set for high-cost counties by the Federal Housing Finance Agency (FHFA).

These loans give homebuyers in expensive markets access to low mortgage rates and flexible options without needing to resort to a jumbo loan. Read on to learn all about high balance conforming loans and see if you could benefit from one.

What is a High Balance Conforming Loan?

The FHFA sets maximum loan limits each year for loans eligible for purchase by Fannie Mae and Freddie Mac. The baseline limit applies nationwide, while the high-cost area maximum is for counties where home values are well above the U.S. median.

A high balance conforming loan is one that falls between:

• The baseline conforming loan limit ($766,550 in 2024)

• The high-cost area loan limit ceiling ($1,149,825 for a single-family home in 2024)

For example, if you wanted to buy a $900,000 home in a high-cost county like Los Angeles or San Francisco, it would exceed the baseline limit but still fall under the high-cost max. So you could get a high balance conforming loan for the amount needed.

What Are the Benefits of a High Balance Conforming Loan?

Compared to jumbo loans, high balance conforming loans offer several advantages:

• Lower mortgage rates – Rates are very close to normal conforming loans and lower than jumbo loans.

• Smaller down payments – Only 5-10% down required compared to 15-20% on most jumbos.

• Lower credit score requirements – Minimum of 620 FICO compared to 700+ for most jumbos.

• No mortgage insurance – No PMI required with down payments above 20%.

• More flexible debt-to-income ratio – DTI limit of 45% instead of 43% for conforming loans.

• Lower fees – Avoid jumbo loan origination fees and costs.

Overall, a high balance conforming loan provides an affordable financing option for high-cost markets.

High Balance Conforming Loan Limits for 2024

The FHFA has set the following high balance conforming loan limits for 2024:

• 1-unit properties: $1,149,825
• 2-unit properties: $1,472,250
• 3-unit properties: $1,779,525
• 4-unit properties: $2,211,600

Check if your county has limits lower than these ceilings by using the FHFA’s loan limit lookup tool. The limit is based on an area’s median home values relative to the baseline, up to the maximum amount.

For exact loan limits in your county and property type, refer to Fannie Mae’s list of 2024 maximum loan limits.

What Areas Qualify for High Balance Conforming Loans?

High-cost areas where home values far exceed nationwide medians are eligible for the expanded conforming loan limits. Currently, these areas include:

• Most of California and the West Coast
• Northeast corridor (NY, NJ, CT, MA areas)
• Mid-Atlantic (DC, MD, VA)
• Parts of Colorado and Utah
• Scattered high-cost metro areas like Chicago, Honolulu, Seattle

Refer to the FHFA conforming loan limit map to see if your county falls into the high-cost category. If the limit is above the baseline for your property type, a high balance conforming loan is an option.

What Are the Requirements and Qualification Guidelines?

While easier to qualify for than jumbo loans, high balance conforming loans do have stricter requirements than a regular conforming loan:

• Credit score – Minimum 620 FICO score required, with 720+ ideal

• Down payment – At least 5% down, 10-20% recommended

• Debt-to-income ratio – Maximum 45% back-end DTI

• Loan amount – Must be within county’s high-cost limit

• Loan-to-value ratio – Up to 97% LTV allowed

• Mortgage insurance – Required for LTV above 80%

• Reserves – 2-12 months reserves recommended

Provided you meet these standards, a high balance conforming loan can help you buy in a high-cost market while enjoying lower rates and costs.

How Do I Apply for a High Balance Conforming Loan?

Follow these steps when applying for a high balance conforming mortgage:

• Check your county’s loan limit to see if you qualify

• Find lenders that offer high balance conforming loans

• Get pre-approved to confirm you meet credit, income, and down payment requirements

• Compare options from multiple lenders to find the best rates and fees

• Submit all required documentation (W-2s, pay stubs, bank statements, etc.)

• Undergo appraisal and underwriting once an offer is accepted

• Be prepared to make a larger down payment than a regular conforming loan

With proper preparation, documentation, and shopping around, you can land a great high balance conforming loan.

What is the Difference Between a High Balance Loan and a Jumbo Loan?

Though jumbo loans also offer higher lending limits, high balance conforming loans have some key advantages:

Lower mortgage rates – High balance loans have rates very close to conventional conforming loans, while jumbo rates are 0.25% to 0.5% higher generally.

Smaller down payments – High balance loans only require 5-10% down, whereas jumbos need 15-20% down in most cases.

Lower credit scores – Minimum 620 FICO for high balance vs 700+ for jumbo.

Fewer fees/costs – Avoid jumbo loan origination fees and mortgage insurance premiums.

More flexible DTI – Max 45% DTI on high balance compared to 43% on conforming.

Overall, high balance conforming loans provide easier qualification standards compared to jumbos.

Can I Refinance into a High Balance Conforming Loan?

If you currently have a jumbo loan, you may be able to refinance into a high balance conforming loan to lower your interest rate and payments. To qualify for a refinance, you’ll need:

• Your loan amount to fall under the high-cost limit

• At least 20% equity in the home

• A credit score of at least 620

• A debt-to-income ratio below 45%

Check your county’s loan limits and home value to see if you fall within range of a high balance loan. Then apply with a lender to see if you can benefit from refinancing.

Weighing the Pros and Cons of High Balance Conforming Loans

Pros:

• Lower rates than jumbo loans
• Smaller down payments required
• Easier to qualify based on credit and income
• No mortgage insurance needed above 20% down
• More flexible debt-to-income ratios

Cons:

• Higher costs than conforming loans
• Stricter qualification standards than conforming
• Potentially higher mortgage insurance premiums
• Loan amounts limited by county tiers
• Must use for properties in high-cost areas

For buyers priced out of the regular conforming market but who don’t want a jumbo, a high balance conforming loan can provide the ideal middle ground.

The Bottom Line

If you want to buy a high-priced home while avoiding the hassle of a jumbo loan, a high balance conforming mortgage offers a great solution. You get lower rates, smaller down payments, and easier approval standards. Just be sure to verify your county falls under the FHFA high-cost area limits to qualify. Consult a lender today to go over your options and get pre-approved for a high balance conforming loan!