What happens when your buyer qualifies for the loan, but the condo project does not? 🏢
That is the question real estate agents and loan officers must answer before writing the offer!
I’m Rony Velasquez, and I want to help agents, lenders, and new licensees understand the updated FANNIE MAE CONDO PROJECT GUIDELINES before these rules create a preventable delay.
The biggest lesson is simple:
A strong buyer file does not automatically make a condo project eligible.
The lender must review both:
- The borrower and loan terms
- The condominium project and association
As of September 2026, Fannie Mae’s updated framework makes the project review more important than ever. The former Limited Review path is no longer available for most established condo projects with loan applications dated on or after August 3, 2026. Many projects will now require a FULL REVIEW, unless they qualify for a waiver or another approved review path.
Let’s break down what this means in practical terms! ⭐
THE BIG CHANGE: LIMITED REVIEW IS RETIRED FOR MOST ESTABLISHED CONDOS
For applications dated on or after August 3, 2026, established condominium projects generally cannot rely on the old Limited Review process.
That means many attached condo projects with more than 10 units will need:
- A FULL REVIEW
- A Fannie Mae-approved review through PERS, when applicable
- Or a valid WAIVER OF PROJECT REVIEW, if the project qualifies
This does not mean every condo transaction will be denied or delayed. It means the team must identify the correct review path earlier.
The project review can affect:
- Financing eligibility
- Closing timelines
- Required HOA documents
- Insurance requirements
- Reserve funding
- Special assessments
- The buyer’s available loan options
- The seller’s marketability
I always tell my students: Do not wait until the week before closing to discover that the condo association has missing documents!
WHICH PROPERTIES ARE MOST AFFECTED?
The updated rules primarily affect attached condominium units in established or newly converted projects.
A Full Review may apply to:
- Established attached condo projects
- New or newly converted attached condo projects
- Certain manufactured-home condo projects
- Condo projects with more than 10 units
- Five- to 10-unit projects connected to a larger development or master association
Some properties may qualify for a waiver. These may include:
- Detached condo units
- Units in two- to four-unit condo projects
- Units in five- to 10-unit projects that are not part of a larger development or master association
- Certain units in PUD projects
- Certain eligible refinance transactions
Here is the important compliance point: Do not assume a project qualifies for a waiver simply because it is small.
A five- to 10-unit project that is part of a master association may still require a Full Review. The lender must evaluate the project structure and the applicable Fannie Mae requirements.
WHAT DOES A FULL REVIEW EXAMINE?
A Full Review is a project-level analysis. It is more than checking whether the buyer has income, assets, credit, and employment.
The lender may need to review:
- The HOA’s current budget
- Replacement reserve allocations
- Reserve studies
- Insurance policies
- Delinquency information
- Special assessments
- Litigation
- Structural or safety reports
- Deferred maintenance
- Project legal documents
- Condominium questionnaires
- Evidence of project completion and ownership structure
Fannie Mae’s Full Review Process explains that lenders are responsible for reviewing the project documentation and entering accurate information into the Condo Project Manager system, commonly called CPM.
This is why a “preapproved buyer” is not the same as a “ready-to-close condo buyer.”
RESERVES ARE NOW A MAJOR DEAL-MAKING ISSUE
The HOA budget is one of the first documents I want the transaction team to investigate.
Under the current Full Review standard:
- The replacement reserve allocation generally must equal at least 10% of annual budgeted assessment income
- For loan applications dated on or after January 4, 2027, that minimum increases to 15%
- If the lender relies on a reserve study, the budget must use the highest recommended reserve allocation from the study
- A baseline funding method that allows reserves to approach zero is not enough for the reserve requirement
The reserve study generally must:
- Be completed or updated within the past three years
- Be prepared by an appropriately qualified independent professional
- Address major common-area components
- Estimate remaining useful life
- Estimate repair and replacement costs
- Analyze existing funded reserves
- Provide a recommended funding plan
This is not just an HOA bookkeeping issue. It can affect whether a buyer can obtain conventional financing.
WHAT AGENTS SHOULD ASK EARLY
When I’m helping agents prepare for a condo transaction, I recommend asking:
- Is the reserve study current?
- Does it include a physical inspection?
- Is the HOA following the study’s highest recommended funding level?
- Is the project facing major repairs?
- Are dues likely to increase?
- Is there an active or planned special assessment?
- Does the budget adequately support deferred maintenance?
These questions help uncover risk before the buyer spends time and money on inspections, appraisals, and other transaction costs.
INSURANCE, DELINQUENCIES, AND LITIGATION MATTER TOO
Reserves are important, but they are not the only potential problem.
A Full Review also considers the project’s overall financial and physical condition.
The lender may need to evaluate:
- Master property insurance coverage
- Replacement cost coverage
- Deductibles
- Liability and fidelity/crime insurance
- The number of units delinquent on HOA assessments
- Delinquencies connected to special assessments
- Material litigation
- Critical repairs
- Evacuation orders
- Significant deferred maintenance
Fannie Mae’s requirements generally limit the percentage of units that can be 60 or more days delinquent on common expense assessments. The project may also face restrictions if too many owners are behind on a special assessment.
This is why a buyer’s agent should not describe a condo as “financeable” based only on a previous sale in the building. A previous loan may have closed under different guidelines, with a different lender, or before the current project condition changed.
THE INVESTOR CONCENTRATION CHANGE
One positive change is the retirement of the prior 50% investor-concentration cap for established condo projects under Full Review.
In practical terms, an established project may have more than 50% non-owner-occupied units and still remain eligible, provided it meets the other applicable requirements.
That does not mean investor concentration no longer matters at all.
The lender still needs to review the project’s:
- Financial strength
- Insurance
- Maintenance condition
- Delinquency levels
- Legal structure
- Other applicable eligibility standards
I explain it this way to clients: One removed obstacle does not eliminate the entire project review.
HOW TO AVOID DEAL-KILLING SURPRISES
Here is my practical transaction checklist! ✅
BEFORE WRITING THE OFFER
- Ask the listing side for the HOA contact and management company
- Confirm the total number of units
- Determine whether the project is attached or detached
- Identify any master association
- Ask whether the project has a current reserve study
- Ask about pending or active special assessments
- Discuss the condo with the buyer’s lender before submitting the offer
AFTER ACCEPTANCE
- Order the lender’s condo questionnaire immediately
- Request the current budget and financial statements
- Obtain the reserve study, if available
- Request master insurance information
- Review HOA meeting minutes for repair discussions
- Ask about litigation and structural inspections
- Track every outstanding project document
- Build extra time into the closing schedule
WHEN EXPLAINING THE RULE TO BUYERS
I keep the explanation simple:
“The lender is reviewing both you and the building. Your finances may qualify, but the association must also meet the lender’s project requirements. We are gathering the documents early so we can identify problems before closing.”
That language is clear, accurate, and avoids making promises the agent cannot control.
MY COMPLIANCE REMINDER FOR AGENTS AND LOAN OFFICERS
I do not recommend telling a buyer that a condo is “warrantable,” “approved,” or “guaranteed to close” unless the responsible lender has completed the required review.
The safest approach is to:
- Coordinate early
- Use current guidelines
- Document communications
- Avoid guessing
- Refer underwriting questions to the lender
- Explain risks without creating panic
- Keep the buyer informed at every step
The rules are changing, but the professional solution is not complicated: Start earlier, communicate better, and document everything!
For the official requirements, review Fannie Mae’s General Information on Project Standards, the Waiver of Project Review, and the Full Review Process.
MASTER THE NEW CONDO RULES WITH REAZ SEMINARS! 🏠✨
I created the 2026 Fannie Mae Condo Financing Guidelines Updated training to help real estate professionals, loan officers, HOA managers, and new licensees understand these changes in practical language.
You will learn how to:
- Identify the correct project review path
- Recognize Full Review warning signs
- Understand reserve study requirements
- Prepare buyers for possible delays
- Communicate more clearly with lenders and clients
- Protect your transaction through better preparation
SIGN UP TODAY at https://nas.io/reazseminars!
Together is more fun, and prepared professionals create better outcomes for buyers. Pass it on! 🚀
This article is for educational purposes only. Fannie Mae requirements, lender overlays, state laws, and project conditions may change. Always consult the responsible lender and review the current Selling Guide before relying on a project eligibility determination.
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