Condo Rule Changes Across The U.S.

Condo financing is going through another round of change. Fannie Mae & Freddie Mac have revised the rules lenders use when reviewing condominium projects across the United States. A recent National Association of REALTORS® update outlined changes involving project reviews, HOA reserves, investor ownership, & insurance requirements. Some borrowers may see fewer hurdles in certain projects. Other transactions may face more documentation before a lender can move forward. That means buyers need to look beyond the unit they want to purchase. The condo association can play a major role in whether financing gets across the finish line.

Quick Points

• Limited Review has been eliminated.
• Some small projects can receive waivers.
• Reserve funding requirements are increasing.
• Investor concentration rules have changed.
• Insurance records remain part of lender review.

Why Full Review Now Reaches More Projects

For years, some condo borrowers could qualify through a Limited Review process. That route required less project documentation from the lender. Fannie Mae & Freddie Mac have now eliminated Limited Review. Projects that once qualified may need a Full Review unless another waiver applies. A Full Review can require the lender to collect more information from the HOA. That can place more weight on budgets, reserve records, insurance information, & project documents.

• Limited Review is gone.
• Full Review now covers more transactions.
• HOA paperwork may take more time.
• Lenders need project information earlier.
• Delays can start outside the buyer's loan file.

This changes the way buyers should think about condo financing. Getting personal loan approval is one part of the process. The lender still has to deal with the project.

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Where Smaller Condo Projects May Get Relief

Not every change adds paperwork. Fannie Mae & Freddie Mac expanded the waiver path for condo projects with 10 units or fewer. Projects with five through 10 units must meet added conditions tied to larger developments or master associations. A qualifying waiver can remove the need for a Full Review. That may help transactions in smaller condo communities move through underwriting with fewer project-review demands. Buyers still need a lender to determine whether the property qualifies.

• Projects can have 10 units or fewer.
• Some projects may receive review waivers.
• Larger development ties can affect eligibility.
• The lender makes the financing determination.

So, project size matters. A condo in a building with six units may follow a different review path from a unit inside a much larger community.

Why HOA Reserves Carry More Weight

Reserve funding is another part of the rule change. For Full Reviews beginning in January 2027, the standard reserve requirement rises from 10% to 15% of the association's annual budget. An HOA may use a reserve study instead of the standard percentage. If it does, the lender must rely on the highest reserve recommendation in that study. NAR has raised concerns about how the increase could affect housing costs. Associations may need to adjust budgets or funding plans as the requirement takes effect. Buyers can expect HOA finances to receive attention during underwriting.

• Review the HOA budget.
• Ask about reserve studies.
• Read meeting minutes.
• Look for assessment discussions.
• Share documents with the lender early.

This can reach beyond paperwork. An association's funding position can become part of the financing discussion before a buyer ever reaches closing.

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Why Investor Ownership Rules May Help Some Projects

Another rule has been removed. The former 50% investor concentration cap no longer applies to established condo projects reviewed under Full Review. That means an established project won't fail that part of the review simply because investor ownership passes the old limit. Presale requirements remain in place for new condo projects. Investor ownership can still affect how a buyer views a community for personal reasons. From the GSE financing side, the old 50% Full Review restriction has been eliminated.

• The former 50% cap is gone.
• The change covers established projects.
• Full Review rules still apply.
• New projects retain presale requirements.

For some buildings, this can remove a financing barrier that existed under the prior rules. Buyers still need to have the lender review the project under the standards that apply to that property.

Why Insurance Can Still Affect The Loan

Condo insurance remains part of the financing file. Fannie Mae & Freddie Mac also revised parts of the insurance requirements used for condo projects. Certain roof losses may now be settled using actual cash value under qualifying master policies. That method accounts for depreciation, which can leave a gap between an insurance payment & replacement cost. Master policies may also use higher per-unit deductibles when unit owners carry coverage that addresses that exposure. Lenders have more ways to document whether required replacement-cost coverage is in place. HOA insurance documents can still become a major part of underwriting.

• Request the master policy.
• Review deductible terms.
• Speak with your insurance agent.
• Send lender requests to the HOA.
• Keep insurance documents moving.

A buyer may have insurance lined up for the unit & still run into questions involving the association's master policy. That is why condo insurance needs attention before closing gets close.

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Why Project Approval Can Save Time

Fannie Mae also offers a tool called Condominium Project Manager. The system contains condo projects that meet Fannie Mae requirements. Once a project receives approval, participating lenders can see that status. That can reduce repeat project reviews for later transactions. It can also reduce duplicate requests for questionnaires or association documents. REALTORS® generally cannot access the database unless they serve as an HOA's official representative. Buyers can ask their lender about the project's status early in the loan process.

• Ask whether the project has approval.
• Ask the lender to check status.
• Start project review early.
• Keep HOA contacts available.

A project that already has an approval history may move differently from one entering review for the first time. That is another reason to bring the lender into the condo discussion before deadlines tighten.

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Why This Matters In Greater Phoenix

These rules apply nationwide. They still have clear relevance for buyers considering condos in Greater Phoenix. Condo projects form part of the housing mix across 'The Valley,' from urban buildings to smaller attached communities. Financing can vary from project to project because the lender must review more than the buyer's income or down payment. HOA records can enter the conversation fast. Project status can matter too. Buyers should know that before assuming one condo loan will work like another.

• Ask about financing before making assumptions.
• Get HOA documents early.
• Keep the lender involved.
• Review project issues before deadlines.
• Treat each condo project separately.

Greater Phoenix doesn't have its own version of these Fannie Mae & Freddie Mac rules. The local connection comes from how often condo buyers can run into project-level financing questions during a purchase in 'The Valley.'

Why Your Representation Matters From The Start

Condo transactions can involve the buyer, lender, HOA, seller, & other parties. Requests can move quickly once underwriting starts. That makes representation worth addressing before you write an offer. Your agent should be working for the interests you hired that agent to represent. Dual agency can change that relationship because the same agent or brokerage may have duties connected to more than one side of the transaction. Buyers can choose representation that keeps their side separate. That matters when financing questions, HOA documents, contract terms, or negotiations start piling up.

• Choose your own representation.
• Ask how agency relationships work.
• Know who represents the seller.
• Keep your interests separate.
• Ask questions before signing.

Williams Luxury Homes helps Arizona luxury condo buyers approach the purchase with their own representation from the beginning. That includes raising financing questions early, requesting project documents, & keeping the buyer's position at the center of the transaction. If you want to avoid a dual-agency arrangement, make that decision before you get deep into a deal. Pick the agent you want representing you. Then keep the roles clear from the first conversation through closing.