How Do Super Conforming Loans Work?

Written by Haley HarrisonUpdated: 20th Mar 2022
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Following the financial crisis, the Economic Stimulus Package of 2008 created a category of loans known as super conforming loans. This was to assist borrowers living in areas with higher-than-average home prices. For borrowers looking for an alternative to jumbo loans, super conforming loans offer an attractive deal. Here’s what you need to know.

What Is a Super Conforming Loan?

Let’s start with the definition of a standard conforming loan. A standard-conforming loan is any type of loan backed by Fannie Mae or Freddie Mac. The Federal Housing Finance Agency sets the limit for these types of loans each year to protect borrowers from predatory lending practices.

A super conforming loan is a type of loan that is higher than the conforming limit. As of 2022, the FHFA standard limit for conforming loans is $647,200. A super conforming loan is a loan higher than $647,200 (in 2022) but still considered to be conforming. Any loan higher than this amount that is not conforming will be considered a jumbo loan and subject to stricter requirements and less favorable terms.

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How Do Super Conforming Loans Work?

Each year, the Federal Housing Finance Agency sets the limit for conforming loans across the country and determines the areas that qualify for super conforming loans. Lenders have to offer mortgage loans according to this ruling.

So, how do you know whether you need a super conforming loan?

For VA and conventional loans, you can check out the conforming loan limits map or search for your county on the list of 2022 conforming loan limits. FHA loan borrowers will need to use the FHA loan limit calculator to determine the ceiling for your county. The Federal Housing Administration sets its own limits per county.

Once you’ve determined whether your area qualifies you for a super conforming loan, you’ll apply for the mortgage, provide requested documentation, and wait for the underwriting approval process.

Understanding Super Conforming Loans: Rates, Terms, & Requirements

The super conforming loan category was created to make it more affordable for borrowers to get mortgage financing in areas with higher-than-average home prices. Typically, the terms for conforming loans are much more favorable than jumbo loans.

Rates

Depending on market conditions, interest rates for conforming loans will typically beat those for jumbo loans. If not, they’ll at least be competitive.

Terms

Jumbo loan borrowers typically need to pay a significantly higher down payment. This makes it even more challenging for borrowers looking to buy in already pricey areas. For super conforming loans, the minimum down payment is at just 5%.

Requirements

Given the nature of jumbo loans, lenders tend to have much stricter qualification requirements. Depending on the lender and loan amount, the required credit score typically needs to be between 680 and 740. On top of this, they usually require cash reserves of up to twelve months. With super conforming loans, you can expect a mortgage credit score requirement of around 620 and generally two months of cash reserves.

Super Conforming Loan Rates

As with standard conforming loans, borrowers will need to decide on the type of rate they want to go with: fixed or adjustable/variable. With a fixed-rate mortgage, you pay the same interest over the life of the loan. This is typically the better long-term investment option, especially if you can snag a loan while rates are low.

The other option is a variable or adjustable-rate mortgage. With an ARM, the interest you pay on your mortgage fluctuates with the market. So, while you might luck out in the beginning with low interest, it could change drastically in the future.

Ineligible Super Conforming Mortgages

Some mortgages are ineligible for super conforming status. These mortgages include:

  • FHA Loans
  • VA Mortgages
  • ARMs with initial periods of less than 5 years
  • Mortgages secured by manufactured homes
  • Seller-Owned Converted Mortgages
  • Seller-Owned Modified Mortgages
  • Rural Housing Service Section 502 GRH Mortgages
  • Section 184 Native American Mortgages
  • Affordable Merit Rate® Mortgages
  • Mortgages using an Automated Valuation Model (AVM)
  • Mortgages with custom mortgage insurance
  • Mortgages with annual or monthly lender-paid mortgage insurance premiums

Super Conforming Loan Eligible Property Types

If you’re looking to use a super conforming mortgage to finance a purchase, you’ll need to ensure the type of property you’re after qualifies you. Here are the types of properties eligible for super conforming loans:

  • 1- to 4-unit primary residences
  • Second homes
  • 1- to 4-unit investment properties

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Super Conforming Loan Limits

Even super conforming loans have their limits. In areas where the median home price is more than 115% of the national average, borrowers can get financing at 115% of the local loan limit.

In exceptionally pricey places, such as New York, the D.C. area, Hawaii, and parts of California, the highest conforming loan amount is exactly $970,800, or 150% of the national average. This is the highest tier of super conforming mortgages, and anything higher would not qualify.

What Is the Difference Between a Super Conforming and Jumbo Loan?

The category of super conforming loans was created because homeowners in higher-priced areas were being penalized by jumbo loan terms.

Jumbo loans are typically for large investment projects and not your average family looking to buy a single-family home. But because of conforming loan limits, many homeowners found themselves with no other financing option.

Jumbo loans typically have stricter qualifying requirements and less favorable conditions than conforming loans. Borrowers need to have a higher credit score, higher cash reserves and be ready for a higher down payment. On top of this, the interest rates are typically higher than with conforming loans.

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Bottom Line: Super Conforming Loans

Super conforming loans are a great financing option for homeowners looking to live in the pricier parts of the country.

It’s an attractive alternative for many buyers, and they offer more affordable terms and less stringent qualifying requirements than jumbo loans. To see if you qualify for a super conforming loan based on where you live, check out the FHFA map of conforming loan limits for 2022.

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Haley Harrison
Haley Harrison

Haley is an experienced writer and has worked for several years on the title side of the real estate world. Through her work, she helps educate homebuyers on the ways they can prepare for homeownership. When she is not writing or getting buyers and sellers to the closing table, Haley enjoys travelling, studying personal finance, and being at home with her dog. She attended the University of Cincinnati majoring in International Relations, and holds a M.A. in Bilingual Education from Universidad de Alcalá. Haley’s areas of expertise spans mortgages, real estate, and loans.