What does the term 'conforming conventional loans' refer to?

The term 'conforming conventional loans' specifically refers to loans that meet the guidelines set by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac. These loans adhere to certain criteria regarding loan amount, credit score, debt-to-income ratio, and other factors that the GSEs establish to ensure a uniform standard within the mortgage market. By meeting these guidelines, conforming loans can be sold in the secondary market, which helps to provide liquidity and stability in the real estate financing process.

In contrast, loans guaranteed by the government would fall under a different category, such as FHA or VA loans, and thus do not qualify as conventional loans. Loans exceeding the conforming loan limit are termed "jumbo loans" and do not conform to the GSE guidelines, which makes them ineligible for sale to these enterprises. Lastly, loans that cannot be sold on the secondary market are typically not considered conforming, as the ability to be sold is one of the primary characteristics of conforming conventional loans.