Condo Financing Update
Fannie Mae and Freddie Mac are opening some doors for condo loans, while asking HOAs to show stronger reserves, cleaner documents, and more serious insurance planning.
The Setup
Fannie Mae and Freddie Mac do not just look at the borrower when financing a condo. They also look at the condo project: the HOA, budget, insurance, reserves, repairs, lawsuits, owner mix, and governing documents.
That matters because many conventional lenders want loans that can be sold to Fannie or Freddie. If the project does not work, the loan may not work, even when the buyer has strong credit and a good down payment.
One small translation note: in the agency guidance, the word "Seller" often means the lender selling the loan to Fannie or Freddie. It does not mean the homeowner selling the condo.
The headline is useful but incomplete: some condos may become easier to finance, while weaker associations may have less room to coast.
Small Buildings
Qualifying small condo projects can avoid some of the full project review that often slows a loan down. That can help boutique condo buildings where the HOA is real, but not exactly run like a Fortune 500 company.
Rental Mix
Established projects with a higher share of investor-owned or rented units should have more room under the conventional rules. That could help both buyers and sellers in buildings that previously looked too investor-heavy.
Full Reviews
Some lighter review paths are expanding, but many ordinary condo buildings will still face deeper lender review. That means budgets, insurance, reserves, litigation, repairs, and HOA responsiveness can affect whether a buyer's loan gets approved.
Where The Rules Get Tougher
Beginning in 2026 and 2027, many condo projects will face more serious reserve expectations. If a lender relies on a reserve study, the HOA generally needs to fund the study's recommended allocation, not a friendlier version that lets the account drift toward empty.
Starting January 4, 2027, many Full Review projects generally need to budget at least 15% of annual assessment income for capital reserves, up from the familiar 10% benchmark.
That is not glamorous. Neither are roofs, elevators, plumbing lines, balconies, and waterproofing. But those are exactly the kinds of expenses that turn a quiet HOA into a special-assessment machine when nobody saved enough money.
Insurance
The agencies are relaxing some master-insurance mechanics. For example, certain roof coverage can be based on actual cash value rather than replacement cost, and master-policy per-unit deductibles may be higher.
That may help more projects pass underwriting in difficult insurance markets. The tradeoff is arithmetic. Actual cash value subtracts depreciation, and a high per-unit deductible can leave a larger bill for the owner or HOA after a loss.
For buyers, the individual HO-6 policy deserves more attention. If the master policy does not fully cover the unit interior, improvements, or a large per-unit deductible, the owner's policy may need to carry enough coverage to fill that gap.
Buyer Read
Buyers should still review the budget, reserve study, insurance declarations, deductible schedule, board minutes, pending repairs, lawsuits, special assessments, and condo questionnaire. That sounds tedious because it is. It is also cheaper than discovering the problem after close of escrow.
The practical contract point is simple: a loan contingency is not always enough. In a condo purchase, project eligibility and HOA document review can be their own source of risk.
Seller Read
Sellers should know whether the building is likely to finance before accepting an offer. A beautiful condo can still stumble if the HOA is under-reserved, slow with documents, weak on insurance, or sitting on unresolved repair issues.
Before listing, sellers should try to gather the current budget, recent financials, reserve study, master insurance declaration, deductible schedule, board minutes, special-assessment information, and any available lender questionnaire.
The best surprise in escrow is no surprise. This is especially true when a lender is asking questions the seller has never seen before.
The Takeaway
These changes may help buyers finance certain small, established, or rental-heavy condo projects. That could be meaningful in Los Angeles, where smaller condo buildings and mixed owner/investor buildings are common.
But the rules also put a brighter light on HOA reserves, insurance, repairs, and documentation. Buyers should investigate the building, not just the unit. Sellers should prepare the building story before the buyer's lender writes it for them.
Source note: this page is original commentary based on Fannie Mae and Freddie Mac 2026 condo project review and property insurance updates. It is intended for informational discussion only and is not legal, lending, insurance, tax, or HOA advice. Individual lenders may apply overlays or different timing.
View Fannie Mae LL-2026-03 View Freddie Mac Bulletin 2026-CCondo Guidance
LA Creative Realty can help you read the HOA documents, understand the financing context, and make a clear plan before the transaction gets complicated.