What Fannie Mae's New Condo Rules Mean for Buyers Right Now
Full project reviews are back for nearly every condo loan, and the timeline, paperwork, and building financials all changed this month. Here's what actually shifted and what to check before you write an offer.
If you're shopping for a condo, the rules just changed under you. On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03, the biggest rewrite of condo lending standards since the post-Surfside reforms of 2023. Freddie Mac followed with a matching bulletin. Some pieces took effect immediately. The biggest one, the end of "Limited Review," took effect August 3. That's this month. If you're under contract on a condo or about to make an offer, this is the guide you need before you go further.
The headline change: Limited Review is gone
For years, a buyer putting down 10% or more on an established condo could often skip a deep dive into the building's finances. That shortcut was called Limited Review, and it let a lot of deals close faster with less paperwork.
As of August 3, 2026, Limited Review is retired for essentially all conventional condo loans. Almost every purchase now goes through Full Review, meaning your lender has to dig into the HOA's budget, reserve funding, insurance coverage, delinquency rates, deferred maintenance, and any pending litigation before your loan can close.
Practically, that means:
- More documentation from the HOA or management company, sometimes weeks of back-and-forth
- A real chance the building itself gets flagged, not just your file
- Longer timelines. Build in an extra two to four weeks if you're writing an offer on a condo now
- The possibility that a building you assumed was fine turns out to be non-warrantable once someone actually looks
Reserves have to go from 10% to 15%
Condo associations have historically been required to set aside at least 10% of their annual budgeted assessment income into reserves for future repairs. Starting January 4, 2027, that minimum rises to 15%, and the standards for what counts as a qualifying reserve study got stricter too. A study only counts if it's been done or updated within the last three years.
This one isn't in effect yet for most buyers, but it matters if you're looking at a building now and planning to close later this year or in early 2027. Ask the HOA directly what share of the budget goes to reserves and whether they have a current, qualifying reserve study on file. Buildings that are underfunded now have a deadline to fix it, and the ones that don't will start losing conventional financing eligibility.
Two pieces of good news buried in here
It's not all tighter. Two changes actually make things easier.
**Roof insurance flexibility.** Master policies used to have to insure roofs at full replacement cost, which had gotten expensive or outright unavailable in some markets. That requirement is gone. Roofs can now be insured on an actual cash value basis, which should ease premium pressure for a lot of HOAs, especially in Texas markets that have seen insurance costs climb.
**Investor concentration limits are gone.** Previously, a building where more than half the units were investor-owned (rentals, in other words) could lose conventional financing eligibility entirely. That 50% cap has been eliminated for established projects under Full Review. If you've been eyeing a downtown high-rise or mixed-use building with a lot of rental units, it may qualify for financing again even if it didn't a year ago. One caveat: no single owner can hold more than 20% of units in buildings with 21 or more units, so a building dominated by one investor can still run into trouble.
What this means if you're buying in Austin right now
Austin has a lot of condo inventory that falls right into the middle of this: mid-rise and high-rise buildings downtown and in areas like the Domain, some older buildings with deferred maintenance, and a meaningful share of investor-owned units in newer developments. Here's what I'm telling clients:
- Start the condo questionnaire early- Don't wait until you're under contract to find out the HOA is slow to respond or doesn't have current financials. Ask your agent to pull the HOA docs the moment you're seriously interested in a building.
- Ask about the reserve study before you fall in love with a unit.** If the building doesn't have one, or it's outdated, that's now a real financing risk, not just a nice-to-know.
- Build extra time into your contract- If your closing timeline assumed the old, faster process, add two to four weeks of cushion. Talk to your agent about writing that into the offer.
- Know your backup plan- If a building fails Full Review and becomes non-warrantable, you're not necessarily stuck. Non-QM and DSCR portfolio loans can finance non-warrantable condos, though typically with a larger down payment and a higher rate than conventional.
If your building doesn't pass
A failed review doesn't kill the deal, it changes the loan. Non-warrantable condo financing usually means 20-30% down and a rate a point or two above conventional. It's a real option, and for the right property it still pencils out, especially if you're planning to hold long-term or the price reflects the financing limitation. We walk clients through the actual numbers on both paths before they decide.
The bottom line
These rules exist because lenders got burned assuming a building was financially healthy without checking, and buyers got burned moving into buildings with hidden special assessments waiting. The new standards mean more friction up front, but less risk of an ugly surprise six months after closing.
If you're shopping for a condo, don't wait to find out where a building stands. Call before you write the offer, not after. We'll pull what we can on the building, tell you honestly whether it's likely to sail through or hit friction, and map out financing either way.
SV
Written by
Sonya Valia, Loan Officer · NMLS #394619
With over 24 years in the mortgage industry, Sonya brings deep experience and a hands-on approach to every loan, with a special talent for first-time buyers and complex self-employed scenarios.