03/27/2026
CONDO LENDING GUIDELINES ARE CHANGING SOON, AND HOW THIS AFFECTS YOU AND YOUR COMMUNITY!
In case you missed it, below is the breakdown of the coming condo changes to condo mortgage lending. Even if you're not in the real estate or mortgage business, it's important to stay informed about changes and how they can affect condos and the housing market in your community. The new reserve requirement could catch many HOAs off guard and limit mortgage lending in many communities, negatively affecting property values.
1. The "Limited Review" Process Is Gone. Effective August 3, 2026, lenders will be required to conduct "full reviews" of all established projects — meaning more documentation, more time, higher costs, and greater scrutiny of every condo transaction.
2. Reserve Requirements Are Going Up!!!!
Fannie Mae and Freddie Mac are increasing the minimum reserve funding requirement from 10% to 15% of the annual budget, effective January 4, 2027. Associations must follow the highest recommended funding level identified in reserve studies.
3. Roof Insurance Rules Just Got More Flexible
Updated guidelines now allow for actual cash value (ACV) coverage on roofs for single-family homes and condominiums, rather than requiring full replacement cost value (RCV). This reverses a controversial 2024 policy that was pricing many HOAs out of the market.
4. Small Condo Project Waiver Expanded
Fannie Mae is expanding eligibility for a Waiver of Project Review to include new and established projects with ten or fewer units. Previously, this waiver only applied to projects with four or fewer units — a meaningful expansion for smaller buildings.
5. The 50% Presale Requirement Remains
The presale requirement — that at least 50% of the total units in the project or subject legal phase must have been sold — remains in place. Developers must still hit that threshold before buyers can obtain conventional financing.
6. Investor Concentration Limit Retired
Fannie Mae is retiring the investment property concentration limit of 50% in established projects — signaling more flexibility on investor unit ratios going forward.
THE PROS — What's Working in Our Favor
• Insurance relief is real and immediate. Allowing ACV roof coverage ends a major bottleneck. Hundreds of condo buildings previously ineligible for conventional financing may now qualify — helping buyers and sellers who were stuck.
• Waiver expansion helps small buildings. Projects with 5–10 units can now bypass the full project review process under the right conditions — reducing friction for buyers in smaller condo communities.
THE CONS — What's Raising Serious Concerns
• End of Limited Review = More Time and Cost for Everyone. Lenders will need to collect additional documentation to verify condo association compliance for every single loan — a move that will cost significant time and resources.
• Higher Reserve Requirements Will Price Out HOAs and Trigger Ineligibility. Raising the mandatory reserve threshold from 10% to 15% sounds responsible on paper — but many existing condo associations simply cannot meet this threshold in such a short period. The result? Current owners could find themselves unable to sell, unable to refinance, and watching property values drop because conventional financing is no longer available in their building.
• First-Time Homebuyers Lose Affordable Options. Condos are often the most attainable entry point into homeownership. When projects become ineligible en masse, first-time buyers lose access to the very properties that fit their budget.
• The Transition Timeline is Tight. With the limited review retirement effective August 3, 2026 and the reserve increase kicking in January 4, 2027, lenders, HOAs, and borrowers have very limited runway to prepare — and most don't even know these changes are coming.
