A conforming mortgage is one that is packaged for resale on the secondary mortgage market to Fannie Mae or Freddie Mac, two quasi-governmental agencies that buy mortgages from cooperating lenders. Both agencies set limits annually on the size loans they'll buy. For example, in 2007 the new conforming loan limit in the Seattle area has been raised from $359,650 to $417,000. 

Conforming loans not only have the most competitive interest rates, they also tend to have the most stringent qualifying criteria. If your credit is shaky or you have been job-hopping in recent years, you may find it easier to qualify for a mortgage with a portfolio lender. A portfolio lender is a lender that doesn't routinely sell its loans on the secondary market. You will pay a higher interest rate with a portfolio lender, however.