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Buying or Selling a Condo is Changing.
Beginning August 3, 2026, new Fannie Mae requirements could make the financial health of a condo development even more important when obtaining a conventional mortgage.
The End of the “Limited Review”
One of the biggest changes is the elimination of Fannie Mae’s Limited Review process. Previously, certain condos in established developments could qualify for this streamlined review. For loan applications dated August 3, 2026, or later, those projects will generally need to qualify through a Full Review or, when eligible, a Waiver of Project Review.
A Full Review takes a more comprehensive look at the condo project and not just the individual buyer. This can include the HOA’s finances and budget, insurance, project condition, critical repairs, and other eligibility requirements.
Stricter Reserve Requirements
Fannie Mae is also strengthening its rules regarding HOA reserves.
If a lender relies on a reserve study to demonstrate that an HOA has sufficient reserves, the HOA’s budget must include the highest recommended reserve allocation identified in that study. Fannie Mae is also eliminating the ability to rely on the “baseline funding” method, which allows reserve balances to approach zero.
Then, beginning January 4, 2027, projects going through Full Review will generally need to allocate at least 15% of annual budgeted assessment income toward replacement reserves, up from the current 10% minimum.
Why? Fannie Mae says it has found a correlation between underfunded reserves and condo developments with significant deferred maintenance or critical repairs. When an HOA doesn't have enough money available, owners can face large special assessments or significant increases in HOA dues.
Some Smaller Developments Get More Flexibility
Not every change makes financing more difficult. Fannie Mae expanded its Waiver of Project Review to include eligible new and established developments with 10 or fewer units. For projects with 5–10 units, the development cannot be part of a master association or larger development to qualify for this expanded waiver.
What Does This Mean for Condo Buyers?
Getting pre-approved personally may not be enough—the condo project also has to qualify.
Before buying, buyers should have their agent and lender investigate the project as early as possible. HOA budgets, reserves, insurance, special assessments, deferred maintenance, and project eligibility can potentially affect financing.
Waiting until late in escrow to discover a problem could lead to financing delays or, in some situations, the inability to obtain the intended conventional loan.
What Does This Mean for Condo Sellers?
Sellers should investigate their HOA before putting their condo on the market.
An HOA with inadequate reserves, unresolved critical repairs, insurance problems, or difficulty providing required documentation could limit financing options for prospective buyers. That could potentially reduce the buyer pool or create delays during escrow.
Sellers should consider gathering HOA financials, budgets, insurance information, reserve studies, and other relevant documents early so potential financing issues can be identified before accepting an offer.
The Bottom Line:
When buying or selling a condo, you're dealing with more than an individual property. The financial and physical health of the entire development can affect whether a buyer can obtain financing.
If you are thinking of buying or selling a condo, please reach out to me so I can help you understand what to be aware of up front, and avoid unnecessary delays or transactions falling through.
Michael Majchrowicz
Coldwell Banker Realty
408-886-8037
michael.majchrowicz@cbnorcal.com
CalRE 01784933
https://linktr.ee/michaelmrealestate