finance
nonconforming loan
A nonconforming loan is a mortgage that does not meet the underwriting standards or loan limits set by Fannie Mae and Freddie Mac, so it cannot be sold to them. Examples include jumbo loans above the conforming limit and loans to borrowers with unusual credit or income situations. Nonconforming loans are often held in a lender's portfolio or sold to private investors and may carry higher rates.
- Exam tip
- Conforming means it meets Fannie Mae and Freddie Mac guidelines. A jumbo loan is the most common example of a nonconforming loan.
- Example
- A buyer needs a $1.2 million loan, above the conforming limit in her county, so she takes a nonconforming jumbo loan from a portfolio lender.
Related terms & state variants
Sources
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Last verified: 2026-10-23