The Cheapest Way Into a First Home Just Got Harder to Finance
A rule that took effect Monday means your lender now looks as hard at the condo association as it does at your credit score. It does not close the door on condos. It does change what you need to ask, and when you need to ask it.
The Short Version
As of August 3, 2026, Fannie Mae and Freddie Mac retired the limited review, the lighter check that many established condo buildings used to qualify for. Buildings that used it now need a full review, which means the lender examines the association's finances, reserves, insurance and physical condition before your loan can be sold to Fannie or Freddie. This came from a March 18 Fannie Mae letter to lenders, issued in coordination with FHFA. The reason condos matter here: NAR put the median condo at $380,000 in June against $446,400 for a single-family home. That $66,400 gap is the on-ramp.
What a Full Review Actually Looks At
A project review is underwriting for the building, not for you. Under a full review, the lender collects the association's budget, reserve study, insurance certificates and answers to a lender questionnaire, then checks whether reserves are adequately funded and whether critical repairs are outstanding. Fannie's stated reason is blunt: projects with inadequate reserves cannot absorb surprises, and unit owners get hit with special assessments or dues increases that push them toward default. Two things follow. Your loan now depends partly on decisions a condo board made years ago, and the paperwork has to come from people who do not work for you.
The Part Most Coverage Leaves Out
This is not a blanket requirement, and two details cut the other way. In the same letter, Fannie expanded the waiver of project review to buildings with ten or fewer units, so small projects can skip the review entirely. Five to ten unit buildings qualify only if they are not part of a master association. And per the Mortgage Bankers Association, once a lender completes a full review, the project is recorded as approved in Fannie and Freddie's systems and it is not repeated for every loan. The first buyer into a building absorbs the delay. Buyers after that often do not.
What It Means for Your Offer
Expect timelines to stretch. Dawn Bauman, CEO of the Community Associations Institute, estimates roughly 40% of mortgaged condo purchases used a limited review and could now need a full one, and she notes it takes manual work from the lender and the association both. Two consequences for you. Cash buyers gain an edge, because they can close while your review is pending, so a longer financing contingency is worth more than usual. And if a building fails review, some lenders will still make the loan and keep it in their own portfolio, but Max Slyusarchuk of AD Mortgage points out they typically price that risk in with a higher rate or a larger down payment.
A Failed Review Is Not a Failed Building
Worth saying plainly, because the headlines blur it. Bauman expects some buildings that passed under limited review to come up ineligible under full review over a technicality, and she is direct that this does not mean the building is unsafe, structurally compromised, or in financial trouble. It means a document was missing or a line item did not meet a standard written for a national mortgage market. Separately, if you are buying with an FHA or VA loan, none of this applies to you. This rule governs conventional loans sold to Fannie and Freddie. FHA condo approval is a different process run by HUD, and it did not change.
One More Date to Put on Your Calendar
A second change from that same March letter raises the reserve funding minimum from 10% to 15% of an association's annual budget. It is not in effect yet, and a lot of coverage runs the two dates together. It applies to loan applications dated on or after January 4, 2027. If you are buying between now and then, the 10% standard is the one that governs your loan. If you are buying next spring, ask whether the association plans to raise dues to meet it, because that increase lands on your monthly cost, not the seller's. Three industry groups have asked FHFA to delay it a year. Nothing has been granted.
What to Do Before You Write the Offer
Ask three questions before you fall in love with a unit. First, to the lender: has this project already been through a full review, and if not, how long does yours take? Second, to the listing agent or association: how funded are the reserves, is there a current reserve study, and are there any special assessments approved or under discussion? Third, to yourself: how many units are in this building? Ten or fewer may qualify for a waiver and never see a review at all. Then check what down payment assistance your state offers, because those programs work with condos too.
Programs Vary by Colorado County
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What changed for condo buyers on August 3, 2026?
Fannie Mae and Freddie Mac retired the limited review, a lighter project review that many established condo buildings qualified for. Buildings that relied on it now need a full review, in which the lender examines the association's budget, reserves, insurance and condition before approving your loan. The change applies to loan applications dated on or after August 3, 2026.
Does this mean I cannot buy a condo now?
No. It means the building is reviewed more closely, and that the process can take longer. Buildings with ten or fewer units may qualify for a waiver and skip project review entirely, and once any building passes a full review, that approval is on file and is not repeated for every subsequent loan.
Does this affect FHA or VA loans?
No. This change comes from Fannie Mae and Freddie Mac and applies to conventional loans sold to them. FHA condo approval is a separate process run by HUD, including single-unit approval for individual units in projects that are not FHA approved. VA has its own condo approval process as well. Neither was changed by this letter.
Is the 15% reserve requirement in effect?
Not yet. The increase from a 10% minimum to a 15% minimum reserve allocation applies to loan applications dated on or after January 4, 2027. Both changes were announced in the same March 18, 2026 letter, which is why they are often reported together, but they take effect almost five months apart.
What happens if the condo building fails the review?
Your lender may not be able to sell the loan to Fannie or Freddie, which usually means a denial on that loan. Some lenders will still write it and keep it in their own portfolio, though they commonly offset the added risk with a higher interest rate or a larger down payment. A failed review is often a documentation or technical issue and does not by itself mean the building is unsafe.
What should I ask before making an offer on a condo?
Ask your lender whether the project has already cleared a full review and how long a new one takes. Ask the association how well funded its reserves are, whether a current reserve study exists, and whether any special assessment is approved or under discussion. Ask how many units the building has, since ten or fewer may qualify for a waiver. Then build a realistic financing contingency into your offer.
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