The End of Fast Approvals: Mandatory HOA Checks Threaten Condo Deals
Buying a condominium is about to get a lot more complicatedโand potentially much slower. Federal regulators have officially rolled out tightened underwriting guidelines for conventional condo loans, triggering widespread concerns over increased deal delays and mortgage rejections across the housing market.
The Federal Housing Finance Agency (FHFA), which oversees government-sponsored mortgage giants Fannie Mae and Freddie Mac, has enacted sweeping changes to how lenders evaluate condominium communities. Under these stricter condo mortgage rules, lenders must subject every building to meticulous scrutinyโexamining Homeowners Association (HOA) financial health, insurance coverage limits, and structural safety before approving conventional financing.
Fannie Mae retired Limited Review on August 3, 2026, because it did not include an assessment of the condo projectโs financial condition. However, not every condo loan now requires a new Full Review. Depending on the project and transaction, a lender may be able to use a current Fannie Mae or FHA project approval or a Waiver of Project Review.
Key Changes to Condo Loan Approvals
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Beginning with loan applications dated January 4, 2027, lenders conducting a Full Review must generally confirm that the associationโs annual budget allocates at least 15% of its assessment income to reserves for future maintenance and major repairs, up from 10%. If the budgeted allocation is below 15%, an acceptable reserve study may provide another way to demonstrate that the project is adequately funded.
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Strict limits on master insurance deductibles and structural assessment requirements.
Housing advocates argue the updated guidelines are intended to protect buyers from underfunded HOAs and hidden special assessments. However, economists warn that the extra administrative hurdle will slow down transactions significantly. “Where lenders previously performed light-touch reviews, they must now inspect every detail of the HOA budget and legal status,” noted Joel Berner, senior economist at Realtor.com. “That extra friction makes financing rejections and closing delays far more likely.”
HOA Reserves
A condo project that does not meet Fannie Maeโs published requirements at the time of review may affect whether a particular loan is eligible for purchase by Fannie Mae. However, budgeting less than 15% does not automatically make a project ineligible because an acceptable reserve study may provide another way to demonstrate adequate funding. Depending on the project and transaction, other eligible review paths may also apply.
What Buyers and HOA Boards Must Do Now
For buyers, shopping for a condo now requires vetting the HOA’s financial disclosures as carefully as inspecting the unit itself. If an HOA is slow to provide questionnaires or lacks adequate reserves, loan approval could grind to a halt.
For HOA boards, updating reserve studies, organizing insurance documentation, and budgeting for higher reserve contributions are immediate priorities to keep property values protected.
