Which type of loan meets the criteria set by Freddie Mac or Fannie Mae?

A conforming loan is specifically defined as a mortgage loan that meets the guidelines and criteria established by Freddie Mac or Fannie Mae. These government-sponsored enterprises (GSEs) set specific limits on the loan amounts and require that loans conform to their underwriting standards, which include borrower creditworthiness, down payment amounts, and debt-to-income ratios.

Conforming loans are designed to be suitable for the mainstream market, allowing lenders to sell their loans to Freddie Mac or Fannie Mae. This helps in providing liquidity and stability in the housing market. Furthermore, because these loans adhere to set guidelines, they typically offer borrowers more favorable interest rates compared to non-conforming loans.

Other types, such as non-conforming loans, do not meet the standards set by these GSEs and may include loans that are higher than the conforming loan limits. Subprime loans cater to borrowers with poor credit histories and generally carry higher risks and interest rates, while government-backed loans, such as FHA or VA loans, are secured by government agencies but are not classified as conforming loans.