What Every Agent Needs to Know About the 2026 Condo Rule Changes
If you’ve got condo buyers or sellers in your pipeline, there are some significant federal rule changes coming that could directly affect whether deals close. These aren’t hypothetical. Fannie Mae and Freddie Mac published updated guidelines on March 18, 2026, with specific effective dates, and some are already in motion.
Here’s what matters most for your clients.
Full Reviews Are Becoming the New Normal
Starting August 3, 2026, the “Limited Review” process that made condo financing relatively painless for years is going away. Nearly every condo transaction will require a Full Review, meaning lenders will need to dig into the association’s financials, insurance policies, and maintenance records before a loan can be approved.
For your clients, this means one thing: the HOA’s paperwork situation matters more than it ever has. If a board is disorganized, behind on their reserve study, or slow to respond to document requests, it can stall a closing. Before your buyer falls in love with a unit, it’s worth asking whether the association is in good shape to hold up to that scrutiny.
Reserve Requirements Are Going Up
In January 2027, the minimum reserve allocation for condo associations jumps from 10% to 15% of their annual budget. The guidelines are also eliminating the practice of keeping reserves just barely above zero. Associations using a reserve study must now fund to the highest recommended amount in that study, not the minimum.
What this means practically: HOA fees are likely going up in communities that haven’t been properly funded, and associations that don’t meet the new floor risk becoming essentially unfinanceable by Fannie and Freddie. If a project gets flagged, owners can’t sell to buyers using conventional financing. That’s a serious problem for your sellers.
When you’re representing a listing in a condo community, it’s worth doing a quick gut-check on the HOA’s reserve status before you go under contract.
The HO-6 Gap You Need to Know About
This one catches a lot of people off guard, so bear with me for a second.
When someone buys a condo, there are two layers of insurance at play. The association carries a master policy that covers the building and common areas. The individual owner carries an HO-6, which is the personal condo insurance policy that covers their unit’s interior, their belongings, and their personal liability.
Both Fannie and Freddie have updated their guidelines to allow associations to carry a master policy deductible of up to $50,000 per unit. Lenders are being encouraged to implement this now, with July 1, 2026 as the mandatory deadline. Boards may choose this to reduce their overall premium costs, which is understandable given where insurance prices have gone. But here’s the catch: when a loss occurs, that deductible doesn’t just disappear. It gets passed down to the individual unit owner.
So if a pipe bursts and causes $80,000 in damage, the association’s master policy may not kick in until the first $50,000 is accounted for. That $50,000 lands on the owner.
Under the new guidelines, if the master policy has a per unit deductible, the borrower is now required to carry an HO-6. And that HO-6 has to actually cover the gap. Specifically, the coverage limit must be at least equal to the deductible amount, it must cover the same perils as the master policy deductible (wind and hail, for example), and it must be sufficient to cover any interior finishes or improvements the master policy doesn’t touch.
Most standard HO-6 policies aren’t automatically written to do all of that. It’s a quick conversation to have before closing, but it’s one that’s easy to skip in the middle of a busy transaction. Adding it to your buyer checklist now is worth it.
Some Immediate Good News for Smaller Projects
On the positive side, condo projects with 2 to 10 units now have a path to skip the full project review process entirely under both Fannie and Freddie guidelines. This is effective immediately. If you’re working with buyers interested in smaller condo buildings or townhome-style communities, financing may actually be simpler than it used to be, as long as the project isn’t part of a larger master association.
When the Project Doesn’t Qualify: Non-Warrantable Condo Loans
Not every condo project will pass a Full Review, and that doesn’t necessarily mean the deal is dead. If a project fails to meet Fannie Mae or Freddie Mac’s guidelines, it becomes what’s known as a “non-warrantable” condo. That just means the loan can’t be sold to Fannie Mae or Freddie Mac, which are the government-sponsored enterprises (GSEs) that buy the majority of conventional mortgages in the United States. But it doesn’t mean financing is impossible.
The tradeoff with portfolio loans is that they typically come with higher interest rates and may require a larger down payment. Terms vary significantly from lender to lender, so it pays to know who the right portfolio lenders are before you find yourself needing one in the middle of a transaction.
The practical takeaway for you as an agent: if you’re working in a building that has known HOA issues or has struggled with conventional financing in the past, it’s worth having the non-warrantable conversation with your buyer’s lender before you go under contract. Getting that question answered on the front end protects everyone and keeps the deal from unraveling at the worst possible moment.
The Bottom Line
Condo financing is getting more complicated, not less. The associations that have their finances in order and their documents organized will sail through. The ones that don’t could quietly become deal-killers, regardless of how much your buyer loves the unit.
If you ever have a condo deal in contract and something feels off on the financing side, don’t hesitate to reach out early. These are the kinds of issues that are much easier to navigate before you’re three weeks into a closing timeline.
Written and Submitted on behalf of the MetroTex Lender Sub-Committee by Matt Watson, Mortgage Broker NMLS #2588338 | CONMLS #320841