Condo Financing Just Got a Makeover: What Buyers and Sellers Need to Know
If you've been eyeing a condo - whether you're hoping to buy your first one or thinking about selling the one you're in - there's a shift happening behind the scenes that's worth knowing about. Fannie Mae and Freddie Mac, which together back roughly 70% of the home loans originated in the U.S., have rolled out significant changes to how condo projects get approved for financing in 2026.
Why now? The changes trace back to the 2021 Surfside, Florida condo collapse that killed 98 people. In response, Fannie Mae and Freddie Mac have been tightening how closely they scrutinize a building's finances, reserves, and structural condition - shifting more responsibility onto condo associations to prove their buildings are financially and physically sound before a loan can be backed.
The short version: if you're looking at a smaller condo building, financing may just have gotten a lot easier. If you're looking at a larger one, be ready for more paperwork, more scrutiny, and more patience.
Smaller Condo Buildings (2–10 Units): Good News
If you're shopping in a smaller condo project - think a converted duplex-style building up through a modest 10-unit complex - the process just got simpler:
2–4 unit projects no longer require a condo questionnaire at all.
5–10 unit projects generally won't need one either.
The old rule requiring at least 50% owner-occupancy in established projects has been eliminated.
For buyers, this means fewer delays and less back-and-forth paperwork between your lender and the HOA before you can close. For sellers, it means your building may now qualify for financing that it didn't before - potentially opening your listing up to more buyers.
Bottom line: more small condo projects should now qualify for financing, with noticeably less red tape.
Larger Condo Buildings (11+ Units): More Scrutiny - and More Risk of Delays
As of August 3, 2026, lenders can no longer use the streamlined "Limited Review" process for condo projects with 11 or more units. Every project that size now goes through a Full Review, which typically requires:
A completed condo questionnaire
The HOA's budget
Proof of adequate master insurance coverage
At least 10% of HOA dues going toward reserves (rising to 15% starting January 4, 2027)
A building can fail full review - and put a buyer's financing at risk - if it has any of the following red flags: reserves budgeted below the required threshold, more than 15% of units 60+ days delinquent on HOA dues, a reserve study older than three years, inadequate master insurance, or unresolved structural issues and deferred maintenance.
What this means in practice: industry experts are warning buyers to expect real delays, and in some cases denials, on larger condo purchases. One mortgage professional summed it up simply: "Patience is going to be necessary because it's going to take longer for a project to get approved." Buyers whose building doesn't pass full review may need to turn to non-QM (non-conforming) loans, which can carry interest rates roughly 25–50 basis points higher than a conventional loan, plus added inspection and appraisal costs. Cash buyers, who don't need this kind of financing approval at all, may find themselves with a real edge in these buildings.
Given the added review time, buyers and their agents are being advised to build 60–90 day closing windows into offers on larger condo buildings, rather than the typical 30–45 days.
Coming January 4, 2027
The reserve requirement for buildings with 11+ units increases from 10% to 15% of the HOA budget. Some housing industry groups have already asked the Federal Housing Finance Agency to delay this change by a year, but as of now it remains on the calendar - so it's worth watching.
What This Means for You
If you're buying: Ask early whether a condo building has already been through a full review, how healthy its reserves are, and whether its insurance and reserve study are current. For larger buildings, plan for a longer closing timeline and go in with realistic expectations about the process taking more time than it used to.
If you're selling: Talk to your HOA now about where things stand - reserves, insurance, delinquency rates, and documentation. A building that's financing-ready is far more attractive to the broadest pool of buyers, and getting ahead of these requirements now can prevent a deal from stalling later.
The Takeaway
Smaller condo buildings just became easier to finance. Larger ones now come with meaningfully more scrutiny - and real potential for delays or denials - and that scrutiny is only increasing over the next year. Whether you're buying or selling, understanding a building's financial health upfront can make the difference between a smooth closing and a stressful one.
Have questions about how these changes might affect a specific property you're interested in? Reach out - we're happy to help you sort through it.
Sources: Fannie Mae/Freddie Mac condo review guidelines; Fast Company; WTOP News