In March 2026 Fannie Mae announced new condo guidelines, which will change how condominium purchases are underwritten.  For all mortgages, the loan is dependent on 1) approval of the borrower, and 2) approval of the appraisal (and the appraised value).  For a condo purchase, there is a 3rd element of approval.   This is because the condo association (COA/HOA) typically owns and maintains the physical building and land as “common elements”, and the condo owner simply holds title to a three-dimensional block of space, which I describe as “inside the paint”.  The exact legal boundaries are defined by the community’s governing documents—specifically the Declaration of Covenants, Conditions, and Restrictions.

Thus, a condo owner is in bed financially and structurally with all of the other owners in the condominium project, and the condominium project must meet guidelines for financing.

Mortgage underwriters must “warrant” that the condominium project meets Fannie Mae guidelines.  This is what is meant when you hear the phrase “warrantable condo.”  Condo Associations charge in the range of $250 to $400 to provide the documents that a mortgage underwriter needs.   For that reason, it is impossible for a lender to know that they can do a mortgage on a condo until all of those documents have been reviewed and approved, and that does not happen until there is a sales contract, a loan application, and the loan is underwritten, and the condo project is warranted.

Here are some of the key changes to the guidelines:

  1. Removal of Investor Limits: The old 50% investor concentration cap is removed, which will make it easier to finance investment property purchases in already investor-heavy projects.  There is no longer a maximum number of allowable investor owned units.
  2. Elimination of Limited Review: The “Limited Review” process is being phased out, effective August 3, 2026. Almost all projects must now undergo a Full Review or meet the criteria for a Waiver of Project Review (WPR).
  3. Expansion of Project Review Waivers: Waivers (WPR) are expanded to include both new and established projects with ten or fewer units, provided they meet specific criteria (not part of a master association).
  4. Stricter Reserve Study Standards: If a reserve study is used to demonstrate financial health, lenders must verify that the project is following the highest recommended funding level, as baseline funding methods are no longer allowed
  5. Insurance Changes: Maximum per-unit deductibles on master policies are capped at $50,000 as of July 1, 2026, and roofing may be covered at actual cash value rather than replacement cost
  6. Reserve Requirement Increase: Mandatory reserve funding for capital expenditures and deferred maintenance is increasing to 15% of the annual budget (up from 10%), effective for full reviews starting Jan 4, 2027.

Here are some important take-aways:

  1. With the removal of the 50% cap, it will be easier to finance rental properties, effective 8/3/2026
  2. Associations must immediately re-evaluate budgets to reach 15% reserve funding by 2027, which will likely require higher monthly assessments.  This is a significant increase from the previous 10% reserve funding requirement.  This new standard must be met by 1/4/2027.
  3. There are no more of what were easier to satisfy “Limited Reviews”, effective 8/3/2026.
  4. Projects with ten units or less should benefit from “Project Review Waivers”, effective 8/3/2026, provided they meet specific criteria.
  5. All other projects will need to undergo what I am calling a condo-oscopy – a detailed, full review, to confirm the new, higher standards are met, effective 8/3/2026
  6. Projects with significant deferred maintenance or pending evictions for safety issues are ineligible for financing, effective 8/3/2026.

 

Read the Fannie Mae Update Here