Attention Condo Owners
THERE ARE MAJOR CHANGES HAPPENING IN CONDO LENDING (And how they impact you)
PHASE I - in effect as of August 2026
Insurance | HOA Insurance deductibles that are written as a percentage are capped at 5%. If the building/association has a per-unit dollar deductible, that is capped at $50K per unit. (Confirm that your personal HO-6 policy can (and does) cover any per-unit deductibles in the master insuance policy.)
Changes in reveiws | 2-4 Unit buildings: Streamlined review/waiver possible. 5-10 unit buildings: Waiver expanded for projects not part of a master association. 10+ unit buildings: Full Review requited. Full review means a buyers’ lender is looking at reserve studies (if completed in the last 3 years) as well as ALL financials, meeting minutes, etc. Much more stringent review before underwriting approval).
Reserve Studies | Either the HOA budget meets the minimum reserve allocation, or a study completed in the last 3 years is used (budget funds highest reccomended allocation). (If a reserve study was completed in the last 3 years, it’s considered in underwriting’s decision making).
Investor Concentration | 50% investor cap removed for established HOAs (not new projects). (Condos will be able to be more investor-heavy. Implications for communities with litte owner-occupancy. More financing options for communities that are already investor-heavy).
PHASE II - will go into effect January 4th, 2027
Reserve Contribution | Minimum HOA reserve funding rises from 10% to 15% of annual budgeted assessment income... meaning 15% of total HOA revenue must be allocated to reserves in order to qualify for Fannie/Freddie mortgages. (2027 budgets being done now, should reflect this - in order to keep the HOA warrantable* in 2027).
*Warrantability is the ability for an association to meet Fannie Mae & Freddie Mac lending guidelines. Most mortgages are backed by Fannie/Freddie, therefore most buyers are using these loan products. If an HOA is not warrantable with Fannie/Freddie - that doesn’t mean it’s un-sellable. But the available lending options do become limited (which in turn, can limit the pool of buyers, making it harder to sell).
If you are thinking of Selling or Buying a CONDO - make sure you’re connected with an agent who understands these changes and their implications in the marketplace. Call us if you want to chat!
Minnesota | Caitlin | 608-333-8409
Colorado | Robin | 612-759-1878
