New Condo Financing Rules Could Affect Buyers and Sellers Beginning August 2026

by Shane Parker

If you're buying or selling a condominium, there's an important change you should know about.

Beginning August 3, 2026, Fannie Mae and Freddie Mac have significantly tightened their condo lending requirements. While these changes are designed to protect homeowners and lenders, they could also mean longer loan approvals, more documentation, and financing challenges for some condo communities.

What's Changing?

In the past, many conventional condo loans qualified for a streamlined approval process that required less review of the condominium association.

That process has now been eliminated for most transactions.

Lenders will now conduct a much more thorough review of the condominium project before approving a mortgage. This includes evaluating:

The HOA's financial health
Reserve funding
Insurance coverage
Deferred maintenance
Structural concerns
Pending litigation
Special assessments

If the association doesn't meet Fannie Mae or Freddie Mac guidelines, a buyer's loan may not qualify.

Why This Matters

This change affects far more than just paperwork.

Buyers may experience:

Longer loan approval times
More requests for HOA documents
Potential financing denials
Higher down payment requirements or interest rates if conventional financing isn't available

Sellers may experience:

A smaller pool of qualified buyers
Longer time on the market
More cash offers
Additional questions about the condominium association before receiving an offer

Another Important Change Coming in 2027

Starting January 4, 2027, many condominium associations seeking Fannie Mae or Freddie Mac financing will be expected to allocate 15% of their annual operating budget to reserve funds, up from the current 10%.

Reserve funds pay for major repairs such as roofs, parking lots, siding, elevators, and other common elements.

Associations with insufficient reserves may need to:

Increase monthly dues
Levy special assessments
Adjust their annual budgets

Why Are These Rules Being Implemented?

These changes stem from lessons learned after the tragic collapse of Champlain Towers South in Surfside, Florida, in 2021. Investigations revealed years of deferred maintenance and structural deterioration.

Since then, Fannie Mae and Freddie Mac have steadily strengthened their lending requirements to better identify condominium communities facing financial or structural challenges before approving mortgage financing.

What This Means for Michigan Buyers and Sellers

Many condominium communities throughout Southeast Michigan will likely continue to qualify for financing without significant issues. However, older developments or associations with limited reserves, deferred maintenance, or pending special assessments may experience additional scrutiny.

If you're considering purchasing a condo, it's more important than ever to review the association's financial condition before making an offer.

If you're selling, having important HOA documents ready before your home hits the market can help avoid delays during underwriting.

My Advice

Whether you're buying your first condo, downsizing, or investing, understanding the financial health of the condominium association has become just as important as evaluating the home itself.

Working with an experienced real estate professional can help identify potential financing issues before they become obstacles to closing.

If you're considering buying or selling a condominium in Southeast Michigan and have questions about how these new lending requirements may affect you, I'd be happy to help.

Shane Parker
Broker/Owner | S&P Realty
Serving Wayne, Oakland, Macomb, Monroe, and surrounding Michigan communities.