What Mortgage Lenders Changed in October 2026: Fannie Mae, FHA, and What It Means for Buyers

October is typically one of the more active months for mortgage guideline updates. Fannie Mae, Freddie Mac, FHA, and FHFA tend to issue Selling Guide updates, Mortgagee Letters, and policy announcements in the fall — often with effective dates that coincide with the new year or the annual conforming loan limit announcement in late November.

Here is a summary of the most consequential developments affecting mortgage borrowers, buyers, and homeowners as of October 2026.

FHFA Conforming Loan Limits: What to Expect for 2027

The Federal Housing Finance Agency (FHFA) announces the following year's conforming loan limits each November, based on the change in average U.S. home prices as measured by the FHFA House Price Index.

For 2026, the baseline conforming loan limit is $806,500 for a single-unit property in most of the country. High-cost area limits — which apply to most of Southern California — are set at 150% of the baseline, or $1,209,750 for a single-unit property. Orange County and Los Angeles County are at the maximum high-cost limit.

The FHFA's House Price Index has shown continued appreciation through mid-2026. If that trend holds through the third quarter measurement period, the 2027 conforming loan limits are likely to increase modestly. A higher conforming limit means more buyers can use conventional financing — rather than jumbo loans — for higher purchase prices, which typically means better rates and more flexible qualification options.

The official 2027 limit announcement is expected in late November 2026. Buyers who are currently shopping in the $800,000 to $900,000 range in California should watch for this announcement — a limit increase could affect their loan program options for closings in early 2027.

What this means for you: If you are planning a purchase in early 2027 and your loan amount is near the current conforming limit, it may be worth waiting to see the new limits before locking your loan program. Talk to your loan officer about the timing.

Fannie Mae: Desktop Underwriter and Income Documentation Updates

Fannie Mae periodically updates its Desktop Underwriter (DU) automated underwriting system and its Selling Guide to reflect changes in how income, assets, and credit are evaluated. In 2026, Fannie Mae has continued to refine its treatment of:

Non-traditional income sources. Fannie Mae has expanded its guidance on documenting income from gig economy work, rental income from short-term rental platforms, and income from multiple part-time positions. The key requirement remains consistency and likelihood of continuance — but the documentation pathways have become more clearly defined, which helps borrowers with non-traditional income profiles get cleaner DU findings.

Asset depletion income. For borrowers with substantial assets but limited traditional income — a common profile among retirees and high-net-worth buyers — Fannie Mae's asset depletion methodology allows lenders to calculate a qualifying income based on eligible assets divided over a set period. The rules around which assets qualify and how the calculation works have been clarified in recent Selling Guide updates.

Remote work and employment verification. Fannie Mae has updated its guidance on verifying employment for remote workers, including borrowers whose employer address is in a different state than the property being purchased. This has been a source of confusion for some lenders, and the updated guidance provides clearer documentation requirements.

What this means for you: If you have been told in the past that your income is difficult to document — because it comes from multiple sources, includes gig work, or is primarily asset-based — it is worth having a current conversation with a mortgage broker. The documentation landscape has evolved, and a profile that was problematic two years ago may qualify more cleanly today.

FHA: Ongoing Implementation of Updated Appraisal and Property Standards

FHA has been in the process of updating its property acceptability criteria and appraisal requirements as part of a broader modernization of the Single Family Housing Policy Handbook (4000.1). Key areas of ongoing implementation include:

Appraisal modernization. FHA has been aligning its appraisal requirements more closely with Fannie Mae and Freddie Mac's UAD 3.6 appraisal data standards, which are being phased in across the industry. For FHA borrowers, this means appraisers are using updated reporting formats and data fields. The practical impact on most transactions is minimal, but it is part of a broader industry shift toward more standardized appraisal data. For more on the UAD 3.6 changes, see our article on what the UAD 3.6 appraisal changes mean for buyers.

Property condition standards. FHA requires properties to meet minimum property standards (MPS) — conditions that ensure the home is safe, sound, and secure. FHA has clarified its guidance on several property condition issues that have historically caused confusion, including the treatment of deferred maintenance, roof condition, and the presence of lead-based paint in pre-1978 homes.

What this means for you: If you are buying an older home or a property with deferred maintenance using FHA financing, your appraiser will flag any conditions that do not meet FHA's minimum property standards. Understanding these requirements before you make an offer — and factoring potential repair costs into your negotiation — can prevent surprises after you are under contract.

VA: Loan Limit Changes and Funding Fee Reminders

The VA eliminated loan limits for eligible veterans with full entitlement in 2020, meaning veterans with full VA entitlement can borrow above the conforming loan limit without a down payment. This remains in effect.

However, veterans with reduced entitlement — typically because they have an existing VA loan on another property — are still subject to loan limit calculations that affect how much they can borrow without a down payment. The 2026 VA loan limits track the FHFA conforming limits.

VA funding fees, which are charged at closing and can be financed into the loan, remain in effect for most borrowers. Veterans with a service-connected disability rating of 10% or higher are exempt from the funding fee. If you have a pending disability rating, it is worth confirming your status before closing — a retroactive exemption can result in a refund of the funding fee.

What this means for you: If you are a veteran or active-duty service member considering a VA loan, confirm your entitlement status and disability rating before applying. These factors directly affect your down payment requirement and closing costs.

The Bigger Picture: Rate Environment and Loan Strategy

Beyond specific guideline updates, the broader rate environment continues to shape loan strategy for California buyers. With rates having moved significantly over the past two years, the decision between fixed and adjustable rates, the value of discount points, and the timing of a rate lock all carry real financial consequences.

If you are planning a purchase or refinance in the next three to six months, the most useful thing you can do right now is have a current qualification conversation — not to lock anything in, but to understand your options under current guidelines and current rates. Guidelines change, and a profile that did not qualify six months ago may qualify today.

Contact us or schedule a call to review your current situation.

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NMLS Individual #1087365 · NMLS Company #1147207 · CA DRE #01265685. SMS Mortgage is a licensed mortgage broker in California and Colorado. Stephanie Pedley holds individual MLO authorizations in Texas through B Walters CO., LLC (NMLS #262157), Ohio through Beacon of Hope Residential LLC (NMLS #2543671), and Nevada through CASMIA HOLDING LLC (NMLS #1740673). Not a commitment to lend. All loans subject to credit approval. Loan program guidelines are subject to change.