Buying a condominium is different from buying a single-family home. The lender must approve not only the borrower and the individual unit, but also the condominium project itself.
That second approval is becoming more important. New condo financing rules from Fannie Mae and Freddie Mac are requiring a closer review of many condominium associations, including their budgets, reserves, insurance, repairs and overall financial condition. As a result, a well-qualified buyer may still have difficulty obtaining conventional financing if the condominium project does not meet agency requirements.
The good news is that a conventional loan is not always the only option. The Chris Jordan Mortgage Team can also evaluate Non-QM financing for certain non-warrantable condominiums.
Have a specific condo in mind? Contact us for a condo financing review. Start with the property address, association name and listing link, if available. We can identify which project documents are needed to evaluate your financing options before you move further into the purchase process.
What Changed With Conventional Condo Financing?
Several Fannie Mae and Freddie Mac changes affect how lenders review condominium projects.
Limited and Streamlined Reviews Were Retired
For loan applications dated on or after August 3, 2026, Fannie Mae retired its Limited Review process and Freddie Mac retired its Streamlined Review process. Many established condominium projects that previously qualified for a shorter review must now receive a more complete project review unless a waiver, exemption or another permitted review option applies.
This can mean more documentation, more questions for the condominium association and a closer look at the project’s physical and financial condition.
Reserve Studies Receive More Scrutiny
When a lender relies on a reserve study because the association’s budget does not meet the standard reserve requirement, the association’s budget must support the study’s highest recommended reserve contribution. The agencies no longer permit the baseline funding method, which allows the reserve balance to approach—but not fall below—zero.
The Minimum Reserve Allocation Is Increasing
For loan applications dated on or after January 4, 2027, the minimum replacement-reserve allocation used in a full project review increases from 10% to 15% of the association’s annual budgeted assessment income.
An association that does not meet the 15% calculation may still have options when a qualifying reserve study supports a different contribution. However, the budget must include the reserve funding recommended by that study.
Not Every Change Makes Condo Financing More Difficult
The agencies also provided some flexibility. Certain projects with 10 or fewer units may qualify for a waiver or exemption from a full project review when all applicable conditions are satisfied. Some owner-occupancy and investor-concentration restrictions were also relaxed for established projects.
The practical result is that the rules are not simply “all condos are harder.” Each project must be evaluated under the review method that applies to the loan, occupancy type and condominium.
What Can Make a Condo Project Ineligible?
A lender may need to review much more than the buyer’s credit, income and assets. Common project-level concerns include:
- Critical repairs or significant deferred maintenance affecting safety, structural integrity, soundness or habitability
- Insufficient master insurance coverage or unacceptable policy terms and deductibles
- Inadequate reserves for future capital expenses and repairs
- Large special assessments, unclear assessment terms or excessive owner delinquencies
- Pending significant litigation involving the association or project
- Condotel or short-term-rental characteristics
- Excessive commercial space, single-entity ownership or other project characteristics that fall outside the applicable guidelines
Fannie Mae reports that insufficient master property insurance and critical-repair issues are currently the two most common reasons projects receive an ineligible status.
What Is a Non-Warrantable Condo?
A “warrantable” condominium generally meets the applicable Fannie Mae or Freddie Mac project requirements. A non-warrantable condo is a project that does not satisfy one or more of those conventional agency requirements or cannot provide the documentation needed for approval.
Non-warrantable does not automatically mean that the building is unsafe or that the unit is a poor purchase. A project may fall outside agency guidelines because of its reserve funding, insurance, commercial space, investor concentration, pending litigation, short-term rentals or another project-level issue. The reason matters because it determines whether an alternative financing program may be available.
Our Non-QM Programs May Offer Another Path
The Chris Jordan Mortgage Team can finance certain non-warrantable condominiums through our Non-QM loan programs. These programs use guidelines that differ from standard Fannie Mae and Freddie Mac requirements, which may allow us to consider projects that cannot qualify for conventional financing.
Every project and borrower must still be reviewed individually. The available terms may differ from a conventional mortgage and can depend on the reason the project is non-warrantable, the buyer’s credit profile, occupancy, down payment, reserves and other factors. A serious safety issue or another unacceptable project condition may remain ineligible even under an alternative program.
The key is to identify the project issue early and determine whether a workable loan option exists before the transaction is too far along.
Documents That Can Help Us Review a Condo Early
Buyers, real estate agents and sellers can help avoid surprises by obtaining condominium documents as early as possible. Depending on the project and loan program, the review may include:
- The completed condominium questionnaire
- The current association budget and recent financial statements
- The master insurance policy and coverage details
- The most recent reserve study
- Structural, mechanical or milestone inspection reports, if completed
- Information about current or planned special assessments
- Details about pending litigation
- Association meeting minutes or repair documentation when relevant
A condominium that qualified for financing in the past is not automatically approved today. Project conditions, insurance policies and lending rules can change. For that reason, it is wise to have the project reviewed before removing financing protections or spending money on an appraisal whenever possible.
Conventional, FHA and VA Condo Rules Are Different
Fannie Mae and Freddie Mac rules apply to conventional financing. FHA and VA loans use separate condominium requirements and approval systems. You can learn more in our guide, Is This Condo FHA or VA Approved?
Buying or Selling a Condo in Maryland, DC or Virginia?
If a condominium project has been declined by another lender—or if you want to check the project before making an offer—the Chris Jordan Mortgage Team can review the available documentation and determine whether conventional or Non-QM condo financing may be possible.
Questions about condo financing or a non-warrantable condominium?
Call us at (240) 670-5090 or email us at CJMT@mainstreethl.com.
Ready to explore your options? Start your prequalification online.
Mortgage guidelines and program availability are subject to change. All loan programs are subject to borrower, property and project eligibility requirements.
