Quick answer: Fannie Mae and Freddie Mac tightened condo lending rules in 2026. The biggest change: Fannie Mae retired its “Limited Review” option for loan applications dated August 3, 2026 or later, meaning most established condos now need a Full Review of HOA finances, insurance, and reserves before a loan can close. Reserve requirements are also rising from 10% to 15% of the budget for applications dated January 4, 2027 or later. Meanwhile, some rules loosened: smaller projects (10 units or fewer) gained new waiver options, and investor-concentration limits were dropped for established projects.
By Janice Darmody, MBA, CPRES, REALTOR® and real estate advisor, Mansfield, Ohio
Key Takeaways
- Limited Review is gone. As of August 3, 2026, Fannie Mae requires Full Review or a Waiver of Project Review for most condo loans that previously qualified for the lighter Limited Review path.
- Reserve minimums are increasing. Current Full Review rules require reserves of at least 10% of the HOA budget for capital expenditures and deferred maintenance. That minimum rises to 15% of annual budgeted assessment income for applications dated January 4, 2027 or later.
- Insurance standards are more specific. Master property insurance must cover at least 100% of the estimated replacement cost of project improvements, and acceptable proof now includes several documentation types (guaranteed replacement cost coverage, insurer estimates, risk appraisals, or professional statements).
- Small projects got relief. Projects with 10 or fewer units (5–10 units must not be part of a larger master association) are now eligible for a Waiver of Project Review.
- Investor concentration limits eased. Fannie Mae retired its 50% investor-concentration cap for established projects under Full Review. Freddie Mac similarly retired its 50% owner-occupancy requirement for Established Condominium Projects (new/converted projects still have separate rules).
- Freddie Mac aligned with similar changes through Bulletin 2026-C, covering project review, owner-occupancy treatment, exempt review eligibility, and insurance.
Why Condo Loans Are Different From Single-Family Home Loans
A condo loan isn’t just an evaluation of the borrower — it’s also an evaluation of the entire building or community. Because condo owners share financial responsibility for roofs, elevators, structural systems, and other common elements, lenders assess project-level risk (HOA financial health, insurance, and maintenance) in addition to the buyer’s personal qualifications. A well-qualified buyer can still be denied financing if the condo project itself doesn’t meet current standards.
In short: the building has to qualify, not just the buyer.
What Exactly Changed in 2026?
1. Limited Review Was Retired
What it means: Limited Review used to let some established condo projects skip a full financial and documentation review. That option is gone for loan applications dated on or after August 3, 2026. Most projects now need a Full Review or a formal Waiver of Project Review.
Documents a Full Review typically requires:
- Current HOA budget and year-to-date financials
- Reserve study or reserve funding analysis
- Master insurance policy details, including deductibles
- A completed condo questionnaire (or lender-equivalent form)
- Disclosure of any special assessments
- Litigation history, if applicable
- Records of repairs, inspections, or known unsafe conditions
- Confirmation of project completion and ownership structure
The exact list varies by lender and loan program, but the underlying goal is the same: give the lender enough documentation to judge the project’s financial and physical health.
2. Reserve Requirements Are Rising
Current rule: Full Review loans must confirm HOA reserves for capital expenditures and deferred maintenance equal at least 10% of the annual budget.
Upcoming rule: For applications dated January 4, 2027 or later, that minimum rises to 15% of annual budgeted assessment income.
Also new: if a lender uses a reserve study instead of the flat percentage, the HOA’s budget must reflect the highest recommended reserve allocation in that study and the “baseline funding method” can no longer be used to waive the reserve requirement altogether.
What this means for HOA boards: Reserve studies need to be current, realistic, and actually reflected in the annual budget — not just filed away.
3. Insurance Rules Are Stricter and More Specific
Master property insurance must now cover at least 100% of the estimated replacement cost of project improvements (common elements and residential structures included).
Acceptable proof of adequate coverage includes any of the following:
- Guaranteed or extended replacement cost coverage
- An insurer’s replacement cost estimate
- An insurance risk appraisal
- A qualified professional’s statement
Unit owners’ own policies: If the master policy doesn’t cover interior unit components, or if it carries a per-unit deductible, individual owners may need their own coverage to fill that gap.
4. Smaller Projects Gained Flexibility
Fannie Mae expanded Waiver of Project Review eligibility to include new and established projects with 10 or fewer units. Projects with 5–10 units must not be part of a larger master association to qualify. Even with a waiver, insurance requirements and unavailable-project-status checks still apply.
5. Investor Concentration Limits Loosened
Fannie Mae retired the 50% investor-concentration limit for established projects reviewed under Full Review (separate presale rules still apply to new/converted projects). Freddie Mac similarly retired its 50% owner-occupancy requirement for Established Condominium Projects, though new condo projects still face owner-occupancy rules.
Buyer Checklist: What to Ask Before Making an Offer
Before waiving contingencies or paying for inspections, buyers should confirm:
- Review type — Does the loan need Full Review, a waiver, FHA approval, VA approval, or another path?
- HOA budget strength — Are operating funds and reserve contributions adequate?
- Reserve study status — Does one exist, is it current, and does the budget follow its recommendations?
- Special assessments — Are any pending, active, unpaid, or tied to major repairs?
- Insurance coverage — Does the master policy meet current agency and lender requirements?
- Deferred maintenance — Any outstanding roof, structural, balcony, elevator, or plumbing issues?
- Litigation — Any lawsuits involving construction defects, safety, or habitability?
- Delinquent dues — High delinquency rates can create financing obstacles on their own.
This list won’t replace full underwriting, but it flags red flags before they surface late in the loan process.
Action Checklist for Sellers and HOA Boards
To avoid financing delays once a unit goes under contract:
- Keep the annual budget, reserve study, insurance certificates, and meeting minutes organized and accessible
- Track special assessments clearly — purpose, amount, payment status, and completion timeline
- Document completed repairs with invoices, inspection signoffs, or professional reports
- Have an insurance professional familiar with condo lending review the master policy
- Answer condo questionnaires accurately and consistently across lenders
- Address deferred maintenance before it becomes a lender objection
- Communicate early with owners if dues or reserve contributions need to increase
Frequently Asked Questions
When did Fannie Mae retire Limited Review for condos? Limited Review was retired for loan applications dated on or after August 3, 2026. Most established condo projects now require a Full Review or a Waiver of Project Review instead.
What is the current condo reserve requirement? Full Review loans currently require reserves of at least 10% of the HOA’s annual budget for capital expenditures and deferred maintenance. That minimum increases to 15% of annual budgeted assessment income for applications dated January 4, 2027 or later.
Can a small condo project skip a full underwriting review? Yes, in some cases. Fannie Mae expanded Waiver of Project Review eligibility to new and established projects with 10 or fewer units (5–10 unit projects must not belong to a larger master association). Insurance requirements and certain project-status checks still apply even with a waiver.
Did investor concentration limits change for condos? Yes. Fannie Mae retired its 50% investor-concentration limit for established projects under Full Review. Freddie Mac retired its comparable 50% owner-occupancy requirement for Established Condominium Projects. New or newly converted projects still have separate rules.
How much insurance coverage does a condo master policy need? At least 100% of the estimated replacement cost of project improvements, including common elements and residential structures, documented through methods such as guaranteed replacement cost coverage, an insurer estimate, a risk appraisal, or a qualified professional’s statement.
Why does this matter if I’m already a qualified buyer? Because condo loans evaluate the project as well as the borrower. A qualified buyer can still be denied financing if the condo association’s finances, insurance, or documentation don’t meet current agency standards — which is why early document review matters.
Bottom Line
Condo financing in 2026 is more project-focused than ever. Buyers should confirm condo eligibility before falling in love with a unit. Sellers should gather HOA documents early. Board members should treat reserves, insurance, and transparency as marketability issues, not just governance checkboxes. Associations that stay organized and financially realistic will have an easier path through today’s and tomorrow’s condo underwriting standards.
Sources: Fannie Mae Selling Guide and Lender Letters (singlefamily.fanniemae.com, guide-selling.fanniemae.com, selling-guide.fanniemae.com); Freddie Mac Bulletin 2026-C and Seller/Servicer FAQ (sf.freddiemac.com).
Have questions about how these changes could affect buying, selling, or financing a condo in the Mansfield, Ohio area? Reach out to Janice Darmody, MBA, CPRES, REALTOR®.
