Every November, a federal agency publishes a set of numbers that quietly redraws the line between a conforming loan and a jumbo loan for the following year. Most homeowners never see the announcement. They only feel it later, when a loan officer mentions that the refinance amount they had in mind now fits under the limit, or sits just over it.
Conforming loan limits are not random, and they are not set by whoever is making your loan. They come from a formula written into federal law, and once you understand the formula, the yearly change stops being a surprise. This guide walks through how the limits are set, why they change, why they almost never go down, and what that means for your own numbers. Figures here are the 2026 values, announced in November 2025.
If you are looking for the current figures themselves, our guide to conventional loan limits in 2026 lists them by unit count, and conforming loan limits by county covers how to look up your own area. This piece is about the machinery behind those numbers.
What a conforming loan limit actually is
Fannie Mae and Freddie Mac buy mortgages from lenders, which keeps money flowing into new loans. They will only buy loans up to a certain size. That maximum is the conforming loan limit, and a loan at or under it is called conforming. The Consumer Financial Protection Bureau describes a loan above the limit as a jumbo loan, which follows its own underwriting standards.
The limits are published by the Federal Housing Finance Agency (FHFA), the regulator that oversees Fannie Mae and Freddie Mac. Your lender does not choose the number, and neither does any individual loan program. It is the same line for every borrower in a given county in a given year.
The formula behind the baseline limit
The starting point is the national baseline limit. For 2026, the baseline for a one-unit home is $832,750, according to FHFA's 2026 announcement.
The rule for moving it comes from the Housing and Economic Recovery Act of 2008, usually shortened to HERA. FHFA states that HERA "requires FHFA to adjust the Enterprises' baseline CLL value each year to reflect the change in the average U.S. home price."
In practice, the process runs on one index and one window of time.
- FHFA measures home prices using its own House Price Index, a seasonally adjusted, expanded-data version that tracks the average U.S. home value.
- It compares the third quarter of the current year with the third quarter of the prior year.
- The baseline limit moves by that same percentage.
For 2026, FHFA reported that home prices rose 3.26 percent on average between the third quarters of 2024 and 2025. The baseline rose by the same amount, from $806,500 in 2025 to $832,750 in 2026.
A year earlier, the change was larger. FHFA's 2025 announcement reported a 5.21 percent rise between the third quarters of 2023 and 2024, which moved the baseline from $766,550 to $806,500.
So the size of each year's increase is not a policy choice. It is the home price index doing arithmetic.
Why the limit almost never goes down
Here is the part that surprises people. If national home prices fall, the baseline limit does not fall with them.
HERA does not provide for decreases in the baseline limit. Instead, it works like a ratchet. When prices drop, the limit holds steady. When prices recover, the limit stays frozen until prices have made up the entire earlier decline. Only then can it start rising again.
The clearest example is recent history. According to an FHFA analysis of conforming loan limits and house prices, the baseline sat at $417,000 from 2008 through 2016. National home prices began rising in 2012, but they stayed below their pre-recession peak for several years. Because the earlier decline had to be fully recovered first, the limit did not move until 2017.
For a homeowner, this is useful to know. The conforming line you are working with today is not going to shrink out from under you next year because of a soft housing market. It either holds or rises.
How high-cost areas get a higher limit
A single national number would be a poor fit for a country where home prices vary enormously from one county to the next. So HERA adds a second formula for high-cost areas.
Under current rules, a high-cost area limit is set at 115 percent of the local median home value, and it can never exceed 150 percent of the baseline. For 2026, that ceiling is $1,249,125 for a one-unit home, which is exactly 150 percent of $832,750.
A little arithmetic shows where the thresholds fall in 2026.
- An area only gets a higher limit when 115 percent of its median home value is above the baseline. That happens once the local median climbs past roughly $724,130.
- An area hits the ceiling once its median reaches roughly $1,086,200. Above that, the limit stays at $1,249,125 no matter how expensive homes get.
- Anywhere with a median below the first threshold uses the baseline.
These cutoffs are our own calculations from FHFA's published formula and figures, and they shift every year along with the baseline.
The formula has changed before. FHFA's analysis notes that an earlier temporary formula, used from 2007 to 2011, was more generous: 125 percent of the area median, capped at 175 percent of the baseline.
Separately, Alaska, Hawaii, Guam, and the U.S. Virgin Islands have their own statutory provisions. For 2026, their baseline for a one-unit home is $1,249,125, per FHFA.
Why your county's limit may depend on its neighbors
The high-cost calculation does not always run county by county. Counties that belong to the same metropolitan or micropolitan statistical area share a single limit, and FHFA sets it using the county in that area with the highest median home value.
FHFA's conforming loan limit FAQ uses the Seattle-Tacoma-Bellevue area as an example. It is made up of three counties, and the highest county median home value as of the third quarter of 2025 was $925,000. Multiply that by 115 percent and you get $1,063,750, which is above the baseline, so every county in that metro area uses $1,063,750.
This is why a more affordable county on the edge of a metro area can carry a higher limit than its own home prices would suggest. It is also why two counties with similar prices, one inside a metro area and one outside, can land on different limits.
Why larger properties get larger limits
The limits scale with the number of units. For 2026, the baseline limits are $832,750 for one unit, $1,066,250 for two units, $1,288,800 for three units, and $1,601,750 for four units. If you own a duplex or a small multi-unit home you live in, check the limit for your unit count, not the single-family figure.
When the numbers change each year
The calendar is predictable, which makes it easier to plan around.
FHFA publishes its third-quarter House Price Index report and the new conforming loan limits at the same time, typically in late November. The 2026 limits were announced on November 25, 2025, and the 2025 limits on November 26, 2024. The new values then apply for the following calendar year.
That means the 2027 limits should arrive around late November 2026. Until they are published, nobody knows the exact figure, so be careful with any number presented as next year's limit before FHFA releases it.
What this means for a refinance or purchase
The conforming limit is a line, and which side your loan amount falls on can change your options, your paperwork, and your long-term cost. That makes it worth understanding if you are close to it.
A few situations where it matters in practice:
- A cash-out refinance amount that lands just above your county's limit might work under the line if the amount is adjusted slightly, or it might be worth taking as a jumbo loan if the extra cash truly serves the plan. Both are legitimate choices, and the right one depends on the whole picture.
- A loan that counted as high-balance or jumbo in an earlier year may now fit under a higher limit, because the baseline has risen each year since 2017.
- If you own a two-to-four-unit home, the higher unit limits give you more room than the single-family number suggests.
- If you are planning a transaction near the end of a year, ask how the calendar change affects your specific file before you settle on an amount.
None of this is about chasing a single number. A conforming loan is not automatically the better loan for every household. The better question is which structure fits your income, your timeline, your total cost including fees, and your plans for the property over the next several years. The limit is one input into that question, not the answer to it.
Smart, careful people miss this all the time, because the system explaining it is spread across federal announcements and technical addendums nobody reads for fun. You are not expected to track the House Price Index. You only need to know that the line exists, how it is drawn, and roughly where your numbers sit relative to it.
A practical next step
If your loan amount is anywhere near your county's limit, a short conversation can save a lot of guessing. A GoodLoan loan officer can look up the limit for your county and unit count, show you where your numbers land, and walk through what changes on each side of the line, including costs, fees, and long-term affordability. GoodLoan is licensed through the NMLS, and we will tell you plainly if a loan structure does not fit your situation. There is no obligation to move forward, and the first step is a conversation about your numbers.
Frequently asked questions
Who sets conforming loan limits?
The Federal Housing Finance Agency sets them each year for loans that Fannie Mae and Freddie Mac can buy. Individual lenders do not set or change them.
How are conforming loan limits calculated?
The baseline limit changes each year by the same percentage as FHFA's House Price Index, measured from the third quarter of one year to the third quarter of the next. For 2026, that was a 3.26 percent increase, which moved the baseline to $832,750 for a one-unit home.
Can conforming loan limits go down?
Under HERA, the baseline limit does not decrease when home prices fall. It holds steady, and after a decline it cannot rise again until prices have fully recovered. The baseline stayed at $417,000 from 2008 through 2016 for this reason.
Why is my county's limit higher than the baseline?
In high-cost areas, the limit is set at 115 percent of the local median home value, up to 150 percent of the baseline. For counties inside a metropolitan area, FHFA uses the highest-priced county in that area, so every county in the area shares the same limit.
When are next year's conforming loan limits announced?
FHFA typically announces them in late November, alongside its third-quarter House Price Index report. The 2027 limits are expected around late November 2026 and would take effect for loans in 2027.
Does a higher limit mean I should borrow more?
No. A higher limit only changes where the line sits. Whether a larger loan makes sense depends on your total cost, your monthly budget, and your long-term plans, which is worth working through with a loan officer before deciding.
