Southern California Sees Modest Increase in Mortgage Limits for 2026

The Federal Housing Finance Agency (FHFA) has announced an increase in conforming loan limits for 2026, raising the maximum mortgage size for one-unit properties in Southern California by 3.26%, or $26,250. The new limit will reach $832,750, up from the previous cap of $806,500 set for 2025. This adjustment will take effect on January 1, 2026, but many lenders are expected to begin funding loans under this new limit sooner in anticipation of the change.

The increase applies to several counties in Southern California, including Los Angeles, Orange, San Diego, Riverside, and San Bernardino. This year’s rise marks a significant slowdown compared to previous years, where increases were notably higher: 5.2% from 2024 to 2025, 5.5% from 2023 to 2024, and a substantial 12.2% increase from 2022 to 2023, which followed the economic impact of the COVID-19 pandemic.

The adjustments to the conforming loan limits are mandated by the Housing and Economic Recovery Act, which requires the FHFA to reflect changes in the average home price across the United States. The increase for 2026 corresponds to the changes noted between the third quarters of 2024 and 2025.

In high-cost areas such as Los Angeles and Orange counties, the FHFA sets a second-tier loan limit, known as high-balance or jumbo mortgages. For 2026, the high-balance limit for Los Angeles and Orange County will rise to $1,249,125, while in San Diego County, it will be set at $1,104,000. Borrowers should note that high-balance loans typically carry an interest rate that is approximately 0.25% to 0.5% higher than conforming loans.

To provide context on borrowing, a well-qualified borrower would need an annual income of approximately $159,000 to afford a home priced at $1,041,000 with a 20% down payment, utilizing the maximum conforming loan amount of $832,750. This scenario would result in a total monthly payment of around $5,961, assuming a fixed interest rate of 5.625% over 30 years.

For those looking at more expensive properties, an income of about $243,500 would be required to purchase a property valued at $1,561,400, again with a 20% down payment and a maximum high-balance loan of $1,249,125. The estimated total monthly payment in this case would be approximately $9,132, based on a 5.99% interest rate.

Different property types also have separate loan limits. For instance, the maximum conforming loan amounts for two-unit properties (duplexes) is set at $1,066,250, while three-unit properties can go up to $1,288,800, and four-unit properties have a limit of $1,601,750. In Los Angeles and Orange counties, high-balance loan limits for two units reach $1,599,375, three units $1,933,200, and a fourplex can secure a maximum loan of $2,402,625. In San Diego County, these limits are $1,413,350 for two units, $1,708,400 for three units, and $2,123,100 for four units.

It is important to note that loans backed by the Department of Veterans Affairs (VA) are not constrained by FHFA limits, as per the Blue Water Navy Vietnam Veterans Act of 2019. In addition, the Federal Housing Administration (FHA) has yet to announce its 2026 limits, but historically, they have aligned closely with the conforming and high-balance limits in Los Angeles and Orange counties, while typically being lower in San Diego and the Inland Empire.

The significance of Fannie Mae and Freddie Mac’s loan limits lies in the implicit government guarantee for loans that fall within these maximum amounts. This guarantee allows for lower mortgage rates compared to non-conforming loans, provided borrowers meet the underwriting standards set by these entities. Exceeding these limits leads borrowers to jumbo loans, which, while potentially offering competitive pricing, often come with stricter qualifying standards.

Current mortgage interest rates reflect ongoing trends in the housing market. The average rate for a 30-year fixed mortgage stands at 6.23%, slightly down from the previous week, while the 15-year fixed rate has averaged 5.51%. According to the Mortgage Bankers Association, there has been a minimal 0.2% increase in mortgage applications compared to last week.

In summary, the adjustment in Southern California’s conforming loan limits for 2026 reflects a slower growth in the housing market compared to previous years. Borrowers looking to navigate this evolving landscape should consider the implications of these limits on their purchasing power and the overall affordability of homes in the region.