If you’re thinking about buying or selling a condominium in the DC metro area (or anywhere in the US,) there’s an important change coming on August 3, 2026, that could affect your ability to get a mortgage—and in some buildings, whether a sale can happen at all.
I’ve been selling condos for nearly four decades, and I can tell you that condo financing has never been as complicated as it is becoming. Beginning this summer and continuing into 2027, new lending requirements from Fannie Mae and Freddie Mac will require lenders to take a much closer look at condominium associations before approving many conventional loans.
The good news? Well-managed condominium communities shouldn’t have much trouble. Buildings with poor financial management, inadequate reserves or incomplete documentation may find buyers have a harder time obtaining financing.
Why Should You Care About the New Guidelines?
Fannie Mae and Freddie Mac are government‑backed mortgage lenders that buy loans from banks and other lenders. Because they control the secondary mortgage market, their rules effectively set the standards for most conventional home loans in the U.S.
When a buyer wants to purchase a condo with a conventional mortgage, the lender must ensure the entire project — not just the borrower — meets Fannie Mae/Freddie Mac’s underwriting standards. If the condo association’s finances, reserves, insurance, or building condition fail these standards, the loan is considered non‑warrantable, meaning it cannot be sold to Fannie Mae/Freddie Mac. This can lead to:
- Higher down payments, interest rates, or stricter qualification rules for buyers.
- Slower or failed sales.
- Lower property values for all owners
Here’s what every condo buyer and seller should know.
Nearly Every Condo Will Require a More Detailed Review
Beginning August 3, 2026, lenders will no longer be able to rely on the simplified “Limited Review” process that has made financing many condominiums relatively straightforward. Instead, most condominium purchases will require what’s called a Full Review. That means lenders will carefully examine the condominium association’s financial statements, reserve funds, insurance policies, maintenance history and governing documents before approving a loan.
This is a significant change because your ability to obtain financing may depend just as much on how well your condominium association is managed as it does on your own credit score. For sellers, this means that an association that is slow to provide documents or has financial weaknesses could delay—or even jeopardize—a closing.
Condo Reserve Funds Are Becoming More Important
Another major change arrives in January 2027.
Condominium associations will generally be expected to dedicate 15% of their annual budget to reserves, an increase from the current 10% requirement.
Associations that rely on professional reserve studies will also need to follow those recommendations more closely instead of funding only the minimum amount. While this may result in higher condo fees in some communities, healthy reserve funds help protect property values and reduce the likelihood of expensive special assessments in the future. Unfortunately, buildings that fail to meet these standards may become difficult to finance using conventional loans.
Why Your Condo Insurance Matters More Than Ever
One of the biggest changes involves insurance.
Every condominium has two insurance policies.
The condominium association carries a master policy covering the building itself and common areas. Individual owners carry an HO-6 condominium insurance policy, which protects the interior of the unit, personal belongings and liability. Under the new lending guidelines, condominium associations may carry master insurance deductibles of up to $50,000 per unit.
While this can lower insurance premiums for the association, it creates additional responsibility for individual owners.
Imagine a water pipe bursts and causes major damage. If the association’s insurance policy has a $50,000 deductible, the owner may be responsible for that first $50,000. Because of this, buyers obtaining conventional financing will generally be required to carry an HO-6 policy with enough coverage to bridge that deductible gap. Many standard condominium insurance policies don’t automatically provide this level of protection, so buyers should discuss their coverage carefully with their insurance agent before closing.
Good News for Small Condominium Buildings
There is one bright spot.
Smaller condominium projects containing 2 to 10 units may now qualify for a simplified approval process under certain circumstances. If you’re purchasing in a boutique condominium building, financing may actually become easier than it has been in the past, provided the project isn’t part of a larger master association.
What Happens if a Condo Doesn’t Qualify?
Not every condominium will meet the new lending standards.
These communities are often called non-warrantable condominiums. That doesn’t mean financing is impossible.
It simply means buyers may need a lender willing to keep the loan in its own portfolio instead of selling it to Fannie Mae or Freddie Mac. Portfolio lenders can often finance buildings that conventional lenders cannot, although buyers should expect higher interest rates, larger down payments or different qualification requirements.
I’ve successfully helped buyers purchase homes in several non-warrantable condominium communities by connecting them with lenders who understand these specialized loans. Knowing the right lender can make the difference between a successful closing and a cancelled contract.
My Advice to Buyers and Sellers
If you’re buying a condominium, don’t focus only on the unit itself. Pay close attention to the health of the condominium association. Ask about reserve funds, insurance coverage, pending special assessments and whether the building has had any financing issues in the past. If you are surprised during the condo review period, remember that you have a set number of days in which to void the contract based on the condo documents. This is a statutory right – just remember to pay attention to the number of days you have to review the documents and use every one of them. (The review period is different in DC, Maryland and Virginia so be sure to confirm how much time you have.)
If you’re selling, understand that buyers—and their lenders—will be asking these questions. A well-managed association can make your property much more attractive and help keep your transaction on schedule. If you think your condo association may be problematic, let’s talk about finding a good lender ahead of going on the market. It is always better to be prepared than to be scrambling for a lender after your buyer has been turned down once.
The Bottom Line
Condominium living remains an excellent option for many buyers, especially in Bethesda, Chevy Chase and Northwest Washington, where condos offer convenience, walkability and outstanding value.
The financing process is simply becoming more detailed.
With careful planning—and an experienced Realtor who understands condominium financing—you can still enjoy a smooth transaction.
If you’re considering buying or selling a condominium, or you’re wondering whether your building might be affected by these new lending guidelines, I’d be happy to help. After nearly 40 years helping clients navigate the condo market, I’ve learned that solving financing challenges early is almost always easier than trying to fix them just before settlement.