Interest rates depend on a number of factors. One of the biggest is loan amount. A person looking for a $200,000 loan is going to have access to better rates than somone seeking an $800,000 loan. While each person's ability to pay back the loan may be the same, the amount of the loan brings more risk causing lenders to charge higher rates.
The conventional loan market
Conforming loans are those that have loan amounts no greater than $417,000. Fannie Mae and Freddie Mac are the organizations that buy these loans and establish the guidelines. This is a more rigid market that has strict guidelines. If you fit into this standard, you can generally expect lower interest rates.
The secondary loan market
Non-conforming loans are those that do not meet standard industry criteria. Secondary lenders have looser guidelines, loan amounts included. While a conforming loan may not exceed $417,000, non-conforming loans are only limited by a lender's willingness to lend at a certain threshold. Of course, the risk is preceived to be higher in this siuation so lenders charge higher interest rates.
You can find more about the conforming loan limits here.
