New Mortgage Rules Could Make Buying a Condo More Complicated

Buying a condo with a conventional mortgage changes on August 3, 2026. Fannie Mae is retiring its limited condo review process, while Freddie Mac is ending its comparable streamlined review option. Many condo purchases that previously qualified through a narrower review will now require the lender to take a closer look at the condominium association’s finances, insurance, reserves and physical condition.

That sounds intimidating. For most condo buyers, it should not be. Well-managed condo buildings will continue to qualify for conventional financing, and experienced mortgage teams already know how to complete full condo reviews. The bigger risk is working with a lender that waits until the end of the mortgage process to review the building—or has no backup plan when a problem appears.

What Is Changing for Condo Buyers on August 3, 2026?

When you buy a condo, the lender approves more than your income, assets and credit. It also reviews the condominium project.

You may be an exceptionally strong borrower with excellent credit, a large down payment and plenty of money in the bank. The condo can still create a financing problem if the association has inadequate insurance, unresolved structural repairs, excessive commercial space or another project-level issue.

Before August 3, certain mortgages in established condo projects could qualify through a limited or streamlined review. The lender still reviewed the project, but the review required less information than a full condo review.

For example, Fannie Mae’s limited review process was generally available for certain established condo transactions with lower loan-to-value ratios. Outside Florida, that could include a primary residence with up to 90% financing. Second homes and investment properties were generally limited to 75% financing.

For loan applications dated on or after August 3, 2026:

• Fannie Mae is retiring Limited Review. A condo that would have previously qualified for this process may now require a Full Review unless the transaction qualifies for a waiver.
• Freddie Mac is retiring its Streamlined Review option. Affected condo transactions will generally need to satisfy Freddie Mac’s requirements for an established or new condominium project review.
• Some project-review waivers will remain available. Smaller projects, detached condos and certain refinance transactions may still qualify for a reduced review or waiver.

The rule change does not mean every condo suddenly becomes difficult to finance. It means lenders need to gather more information about many buildings before issuing final approval.

What Does a Full Condo Review Examine?

A full condo review looks at the financial, legal and physical condition of the entire development. The lender is trying to determine whether the association can properly maintain the property and whether there are problems that could create an unexpected financial burden for the owners.

The lender may review:

• The association’s operating budget. The budget should show that the association collects enough money to pay its normal expenses and contribute toward future repairs.
• Replacement reserves. These are funds set aside for major expenses such as roofing, elevators, exterior work, plumbing systems, parking structures and other shared components.
• Master insurance coverage. The building must carry insurance that satisfies the applicable lender requirements. Coverage shortages and high deductibles can create financing problems.
• Special assessments. The lender may need to understand why an assessment was issued, how much remains unpaid and whether it relates to critical repairs.
• Deferred maintenance and structural repairs. Significant unresolved repairs can make the project ineligible until the work is completed or properly funded.
• Pending litigation. A lawsuit involving the association does not automatically prevent financing, but the lender must understand its potential impact on the project.
• Delinquent association dues. A high percentage of owners who are behind on dues can indicate that the association may struggle to meet its financial obligations.
• Commercial space and project use. A building with substantial commercial space, short-term rental activity or hotel-like services may not fit conventional condo guidelines.
• Ownership concentration. The lender may examine how many units are owned by one person, investor or business.

This is more documentation, but it is not pointless paperwork. A buyer should want to know whether the building has enough insurance, whether a major assessment is coming and whether the association has postponed necessary structural repairs.

The mortgage review can uncover risks that are easy to miss when a buyer is focused on the unit’s kitchen, view, location and monthly payment.

Why Are Fannie Mae and Freddie Mac Tightening Condo Reviews?

The new condo rules are designed to identify associations with underfunded reserves, critical repairs or significant deferred maintenance before a buyer closes.

A condominium association is responsible for expensive shared components that an individual unit owner cannot repair alone. When the association does not save enough money, a new roof, parking garage repair or exterior restoration project may require a substantial special assessment.

A buyer can move into a condo expecting a $700 monthly association payment and receive a $30,000 assessment six months later. Even when the owner can afford the assessment, that expense can disrupt the financial plan behind the purchase.

A stronger project review helps identify those risks earlier. It can also encourage condominium boards to improve their budgets, maintain better records and address critical repairs before they become emergencies.

No building needs to be financially perfect. Condo associations routinely adjust dues, complete repairs and manage insurance increases. The lender needs to determine whether those issues are being handled responsibly and whether the project fits the applicable loan guidelines.

Will the New Condo Rules Delay Mortgage Closings?

They can delay a closing when the lender starts the condo review too late.

A full review requires documents from the homeowners association or property management company. Depending on the project, the lender may request:

• A completed condo questionnaire
• The current association budget
• Master insurance policies
• Information about replacement reserves
• Recent meeting minutes
• Details about pending litigation
• Special-assessment documentation
• Structural or engineering reports
• Information about current and planned repairs

Some associations provide a complete package within a few days. Others move slowly, charge document fees or send incomplete information that creates additional questions.

The mistake is waiting until the borrower’s appraisal, title work and personal underwriting are complete before ordering the condo documents. By then, the closing date may be close and the buyer may have little room to solve a problem.

The condo review should begin as soon as the buyer goes under contract. In a building with known insurance, structural or assessment concerns, the mortgage team may need to investigate the project before the buyer agrees to an aggressive closing date.

At LendFriend Mortgage, the condo review is not an item we save for the end of the file. We identify the project requirements early, order the necessary documents and work through questions while the rest of the loan is moving forward.

Does Every Condo Now Require a Full Review?

No. The headlines make the change sound broader than it is.

Certain condos can still qualify for a waiver of project review. Depending on the loan and property, that may include:

• Some 2- to 4-unit condo projects. Smaller projects may qualify for a waiver when the transaction satisfies the applicable requirements.
• Certain projects with 5 to 10 units. Fannie Mae expanded waiver eligibility for some small projects, although additional restrictions apply. A project with 5 to 10 units generally cannot be part of a larger development or master association to receive the expanded waiver.
• Detached condominium units. A detached home that is legally structured as a condo may receive different treatment from a unit in a large attached building.
• Certain eligible refinance transactions. Some refinances can qualify without a complete project review.

A waiver does not mean the lender ignores the property. Basic project, insurance and property requirements may still apply.

Whether a full review is necessary depends on the project structure, number of units, transaction type, occupancy, loan program and lender. Buyers should not assume that every condo requires the same process.

Condo Reserve Requirements Are Also Increasing in 2027

The August 3 rule is not the only change condo buyers should understand.

For loan applications dated on or after January 4, 2027, Fannie Mae is increasing the standard replacement-reserve allocation for projects undergoing a Full Review. The minimum allocation will increase from 10% to 15% of the association’s annual budgeted assessment income.

Replacement reserves are the portion of the budget saved for future repairs and capital expenses. A properly funded reserve account can help the association pay for major work without relying entirely on sudden special assessments.

A building that does not allocate 15% of its budget to reserves may still qualify if it has an acceptable reserve study and properly funds the amount recommended by that study. The purpose is not to force every association into the exact same budget. It is to make sure the building has a realistic plan for long-term expenses.

This change may create more work for associations with lean budgets. It may also encourage condo boards to address reserve funding before a buyer discovers the problem during a mortgage application.

What Could Make a Condo Ineligible for Conventional Financing?

Condo reviews rarely fail because someone forgot to check a minor box. The more serious problems usually involve the building’s condition, finances, insurance or legal structure.

Common concerns include:

• Critical repairs or major deferred maintenance. The building needs significant work that has not been completed, fully funded or properly evaluated.
• Inadequate master insurance. The association’s policy does not provide the required type or amount of coverage.
• Underfunded reserves. The association has not accumulated enough money or created a sufficient funding plan for anticipated repairs.
• Problematic litigation. A lawsuit could threaten the association’s finances, ownership structure or ability to complete necessary work.
• Unresolved special assessments. The lender cannot determine the purpose, cost or status of an assessment.
• Excessive commercial space. Too much of the project is devoted to restaurants, offices, stores or other nonresidential uses.
• Hotel or transient characteristics. The development operates more like short-term lodging than a residential condominium.
• Financial instability. The association has excessive unpaid dues, an inadequate budget or difficulty meeting its normal obligations.

Discovering one of these issues does not always end the purchase. The lender may need a better insurance explanation, updated financial information, an engineering report or documentation showing that repairs have been completed.

Other problems may require a different conventional lender or another mortgage program.

The key is finding the issue early enough to do something about it.

A Condo Denial From One Lender Is Not Always the End

Fannie Mae and Freddie Mac establish broad eligibility requirements, but mortgage lenders can add their own internal restrictions. These are commonly called lender overlays.

One lender may decline a condo that another lender is willing to approve. A bank may also struggle to interpret a complex insurance policy, reserve study, engineering report or lawsuit. Rather than spending time understanding the issue, the lender may label the project ineligible.

That decision may reflect the bank’s internal process—not an absolute rule that prevents anyone from financing the condo.

A mortgage broker can determine whether:

• Another conventional lender interprets the project differently
• The original lender applied an unnecessary overlay
• Additional documents can resolve the concern
• A portfolio mortgage is available
• A non-QM loan provides a better path to closing

The alternative program may have a different interest rate, down payment or project-review standard. It should still be compared carefully. The important point is that one lender saying no does not always mean the condo cannot be financed.

Non-QM Condo Loans Are Not Controlled by the New Rules

The August 3 changes apply to mortgages following Fannie Mae or Freddie Mac guidelines. Non-QM loans are not sold to Fannie Mae or Freddie Mac and are therefore not governed by the retirement of their limited-review processes.

This can provide valuable flexibility for buyers using:

• Bank statement loans. Self-employed borrowers may qualify using deposits from personal or business bank statements rather than traditional tax-return income.
• DSCR loans. Real estate investors may qualify based primarily on the rental income and expenses of the property.
• Asset depletion mortgages. High-net-worth buyers may qualify by converting eligible assets into monthly qualifying income.

These lenders establish their own condo requirements. Non-QM does not mean the building receives no review. The lender may still evaluate insurance, repairs, litigation, commercial space, association finances and short-term rental activity.

The difference is that the buyer is not limited to a single Fannie Mae or Freddie Mac framework. A building that does not fit conventional condo guidelines may still qualify through a lender with a different risk model.

That does not make non-QM the automatic answer for every condo problem. It gives an experienced mortgage broker another option when the conventional path becomes unnecessarily restrictive.

What Condo Buyers Should Do Before Making an Offer

You do not need to personally underwrite the condominium association. You should ask enough questions to identify obvious concerns and give your mortgage team time to complete the real review.

Before making an offer, ask:

• Is there a current or planned special assessment?
• Are there major repairs under consideration?
• Has the building completed a structural or engineering inspection?
• Does the association have any pending litigation?
• Has the building experienced insurance problems?
• Are association dues expected to increase substantially?
• Who manages the association?
• How quickly does management respond to lender requests?

Do not assume that a recent sale in the building proves your mortgage will be approved. The other buyer may have paid cash, used a different lender, selected a different loan program or received approval before a project issue appeared.

Condo eligibility can change when the association updates its insurance, approves a special assessment, begins major repairs or becomes involved in litigation.

The safest approach is to have your mortgage team investigate the project rather than relying on the listing agent’s assurance that people get mortgages in the building all the time.

Why Working With a Mortgage Broker Matters

A bank generally offers its own loan programs and applies its own condo-review standards. When the project does not fit, the bank may have nowhere else to take the loan.

A mortgage broker can compare multiple lenders, project-review methods and loan programs. That flexibility becomes more valuable when a condo has an unusual insurance structure, a pending assessment, mixed commercial use or another characteristic that requires experienced review.

The broker should do more than submit the same documents to another lender after the first denial. A strong mortgage broker determines why the project was rejected, whether the issue is a true agency restriction and which lender is best positioned to approve it.

This is especially important after August 3. More projects will receive full reviews, which means more lenders will encounter budgets, reserve studies, insurance policies and association documents they are not accustomed to evaluating.

The new rules do not make condo financing impossible. They make lender experience more important.

Why Working With LendFriend Mortgage Matters

Condo financing becomes stressful when the building review is treated as an afterthought.

The buyer is fully approved. The appraisal is complete. The closing disclosure is almost ready. Then the lender finally reviews the condo questionnaire and discovers an insurance issue, special assessment or missing reserve information.

That is how a manageable question becomes a closing emergency.

LendFriend Mortgage starts the condo review early. Our team has extensive experience financing condos, reviewing project documentation and working with associations and property managers to resolve questions before they threaten the closing.

As a mortgage broker, we are not limited to one bank’s condo department or one set of lender overlays. We can compare conventional lenders and, when necessary, evaluate portfolio and non-QM options such as bank statement loans, DSCR loans and asset depletion mortgages.

Most LendFriend Mortgage condo buyers should not experience a material change in their ability to purchase a home because of the new rules. The process may require more documentation, but full condo reviews are not new to us. We already know how to request the right documents, identify potential problems and keep the project review moving alongside the borrower’s approval.

We regularly close complex mortgages on time or ahead of schedule. The August 3 change does not alter that approach. It makes early review and lender flexibility even more valuable.

The Bottom Line

The new Fannie Mae and Freddie Mac condo rules deserve attention. They do not deserve panic.

Many conventional condo purchases will require a more complete review beginning August 3, 2026. That review may examine the association’s reserves, budget, insurance, repairs, assessments and overall financial condition.

Well-managed condominium projects should continue to qualify. Buildings with unresolved financial or structural problems may require more documentation, a different lender or an alternative mortgage program.

The buyers most likely to experience trouble will not necessarily be buying bad condos. They will be working with lenders that start the review late, do not understand the documents or have no alternative when the first program does not work.

LendFriend Mortgage has the condo experience, lender access and underwriting knowledge to identify these issues early. Whether the right answer is a conventional mortgage, portfolio loan or non-QM program, our job is to find the clearest path to closing—not to force every buyer and every building into the same box.