Last month, Fannie Mae dropped a policy update that directly affects condo transactions. Here’s what matters before it hits one of your listings or buyers.
The 10-Second Version
Good news: Buildings with 10 or fewer units no longer require full project review, and the investor concentration rule is gone.
Bad news: Reserve requirements are increasing from 10% to 15%, and Limited Condo Review is going away.
Translation: More deals will get flagged, more HOAs will fail underwriting, and more buyers will hit financing issues if you’re not ahead of it. This could also negatively impact values for some buildings.
If you have condo sellers sitting on the fence, call them. This is the window.
The Full Picture
What Just Got Easier
- Smaller buildings get a pass. Condos with 10 or fewer units can skip the full project review entirely. Small buildings with informal HOAs that previously ran into lender issues? No longer a problem.
- Investor concentration limits are gone. The old 50% cap on investor-owned units is retired. Buildings that couldn’t qualify for conventional financing before may qualify now. If you know of a building that was blocked by this rule, now is the time to go back to those sellers.
- Insurance documentation simplified. Lenders no longer need to verify replacement cost value in detail. Less paperwork, fewer delays.
- Roof coverage flexibility. Roofs no longer need to be insured on a replacement cost basis, just insured. This was becoming a real underwriting headache and it’s gone.
What Just Got Stricter
- Reserve requirements are increasing. HOA budgets must now set aside at least 15% of annual dues for reserves, up from 10%. This takes effect for Full Review loans on January 4, 2027, but HOAs will need to adjust budgets well before then. Translation: higher dues or special assessments are likely coming. That’s your listing conversation today. How will this affect your condo value?
- Limited Review is going away on August 3, 2026. If you have a condo buyer who currently qualifies under Limited Review, we may want to move before the deadline. After August, lenders will need to fully vet HOA financials before submission, or you’ll need a lender (like us) who can pivot to a non-Fannie/Freddie option.
- Reserve study standards are higher. The “just enough to not hit zero” approach no longer qualifies. Associations need to fund at the highest recommended level.
- HO-6 insurance is becoming more common. If a master policy includes a per-unit deductible, even a small one, buyers will now need HO-6 coverage. Not a dealbreaker, but a cost to set expectations around upfront. HO-6 coverage is also known as “walls-in” coverage.
Bottom Line
Some buildings that were previously difficult just got easier to finance. Others with underfunded HOAs are about to face new hurdles.
Broadly, expect HOA dues and special assessments to trend higher across most condo projects over the next 12–24 months. We’re already seeing this come up in active files, and the difference between knowing this upfront vs. finding out in escrow is significant.
The agents who win in this environment are the ones who get ahead of it — meaning the right conversations happen before a buyer is in contract, not after.
If you have a condo listing (or one coming up), send me the address. I’ll run a quick eligibility check and flag any issues before you’re in escrow. It takes me 10 minutes and can save you weeks.
Script: Calling a Condo Seller Who’s Been on the Fence
“Hey [Name], quick heads up — Fannie Mae just changed how condos are financed. Smaller buildings and investor-heavy buildings just got easier to sell into, which is great. But reserve requirements for HOAs are going up starting January 2027, which means dues are likely heading higher over the next year or two as buildings get their budgets in line.
“If you’ve been thinking about selling, the window is right now. Once those higher dues start showing up in HOA documents, they directly affect what buyers qualify for, and that hits your value. This is probably the best financing environment your building is going to see for a while. I’d love to do a quick evaluation of your current value so you have a clear picture of where you stand today.”
Note: Higher HOA dues directly affect buyer purchasing power and net returns for investors. As a rule of thumb, every $100/month increase in dues can reduce what a buyer qualifies for by roughly $15,000 in purchase price.
Please reach out with any questions — Jay Bridges, Mortgage Lender, Priority Capital Corporation | 310-994-8900 | [email protected]