Fannie Mae and Freddie Mac Just Changed the Rules for Condo Financing— Here’s What It Means for You

If you own a condo, sit on an HOA board, or are thinking about buying one, you need to understand what just happened. On March 18, 2026, Fannie Mae and Freddie Mac issued Lender Letter LL-2026-03 and Freddie Mac Bulletin 2026-C — a coordinated set of rule changes affecting which buildings qualify for conventional financing, how much documentation is required to close, and whether HOA dues are headed higher. Some changes take effect immediately. Others land later this year and in early 2027. The clock is already running.

Full interactive version: Condo Rules Timeline

The 6 Changes You Need to Know

1. Reserve Requirement Rising to 15% — Effective January 4, 2027

The minimum reserve allocation rises from 10% to 15% of annual HOA budget. Any building below that threshold after January 4, 2027 becomes non-warrantable — meaning buyers cannot use a conventional mortgage to purchase units there. They would need cash or a portfolio loan, both of which carry higher rates and stricter terms.

The practical implication: buildings currently sitting at 10–14% will need to raise dues before that deadline to stay warrantable. Budget for it now.

2. Reserve Studies Must Use Highest Recommended Funding Level — Effective August 3, 2026

Reserve studies can be prepared under different methodologies — baseline, threshold, and full funding. Under the new rules, only the highest recommended funding level is acceptable. Baseline and threshold methods are out.

Reserve studies must also have been completed within the last 36 months. If your building’s study is older than that, it needs to be updated before a deal can close with conventional financing.

3. Limited Review Is Eliminated — Full Review Required on All Transactions, Effective August 3, 2026

Currently, about 40% of condo transactions close using a streamlined Limited Review — less documentation, faster timelines. That option is gone.

Starting August 3, 2026, every condo transaction requires a Full Review: a thorough evaluation of HOA financials, insurance, litigation status, and building condition. Expect more documentation requests and longer timelines. Sellers and agents who are unprepared will feel this in the second half of 2026.

4. Investor Concentration Limit Removed — Effective Immediately

Good news here. The rule that made buildings non-warrantable when investors owned more than 50% of units has been eliminated. This reopens conventional financing for a number of Austin high-rises and downtown condo buildings that had been locked out of the conventional market. If a building was flagged non-warrantable under that rule, it is worth revisiting.

5. Small Condo Waiver Expanded to 10 Units — Effective Immediately

Buildings with 10 or fewer units can now use the Waiver of Project Review, skipping Full Review entirely. A meaningful improvement for buyers in smaller boutique buildings who have faced unnecessary friction at closing.

6. ACV Insurance Now Permitted for Roofs Only — Effective Immediately

Actual Cash Value (ACV) insurance — which accounts for depreciation — is now allowed for roofs only. All other insured components must still carry Replacement Cost Value (RCV) coverage. A narrow but useful carve-out for older buildings where full RCV roof coverage has been cost-prohibitive.

What Condo Owners and HOA Boards Should Do Right Now

• Check your reserve allocation percentage. If it’s below 15%, you have until January 4, 2027 to close the gap.

• Request your reserve study. If it’s more than three years old, commission an updated one — and confirm it uses the highest recommended funding level.

• Verify your insurance. Replacement Cost coverage is required on all components except the roof.

• Plan for dues increases early. If reserves are short, the increase is coming regardless. Getting ahead of it with a clear board communication beats a last-minute scramble.

• If you own units in high-investor buildings, check whether those buildings are now warrantable. Some previously blocked deals may be viable again.

What Buyers Should Know Before Making an Offer

• Ask about the HOA reserve percentage before you go under contract — not during inspection.

• Understand what non-warrantable means: no 30-year conventional loan. That means cash, portfolio financing, or a hard money product — all more expensive.

• Work with people who actually know these rules. The number of agents and loan officers who understand condo project review guidelines is smaller than it should be.

The Opportunity Angle for Investors

Buildings that fail to reach 15% reserves by January 2027 become non-warrantable overnight. Fewer eligible buyers means softer demand — and potentially softer prices. For investors who can operate outside conventional financing, that may represent a buying opportunity in fundamentally sound buildings with underfunded HOAs.

At the same time, the removal of the investor concentration cap immediately expands the buyer pool for certain Austin urban core buildings. Units that were effectively cash-only plays can now attract conventional buyers, which supports pricing and liquidity.

Agents and investors who build real expertise in condo project eligibility right now will be unusually well-positioned — both as advisors to boards navigating compliance and as deal-makers in a market that most people don’t fully understand.

Questions? Let’s Talk

These rules are detailed, and how they apply to any specific building depends on the facts. If you own a condo, are considering buying one, or are on a board trying to figure out what this means for your community, reach out directly. As both a Compass agent and a licensed MLO, I can evaluate the transaction from both sides — real estate and financing — which matters more than ever when the rules are this technical.