If you're thinking about buying or selling a condo, there are some important changes on the horizon that could affect financing and, ultimately, your transaction.

Fannie Mae and Freddie Mac have announced significant updates to their condo lending requirements. These are some of the biggest changes we've seen in years and are designed to ensure condominium communities are financially healthy. While that's good news for the long-term stability of condo developments, it may also mean a more detailed loan approval process for buyers.

1. Limited Condo Reviews Are Going Away

Effective August 3, 2026, the "Limited Review" option for condo financing is being eliminated. This review process has been used on a large percentage of condo loans because it required less documentation from the homeowners association (HOA).

Going forward, most condo loans will require either a Full Review or qualify for a Project Review Waiver.

A Full Review typically requires the HOA to provide:

• A completed condo questionnaire
• A current operating budget
• Documentation showing reserve funding
• Information about any special assessments
• Details regarding deferred maintenance or building safety concerns

What does this mean for buyers?

The financing process may take longer, especially if the HOA is slow to provide documents or if there are concerns about the property's financial health. Buyers should be prepared for additional paperwork and allow extra time when purchasing a condo.

What does this mean for sellers?

If you're selling a condo, it may be helpful to gather HOA information early in the process. Having the necessary documents readily available can help avoid delays once you're under contract.

2. Higher Reserve Requirements for HOAs

Beginning January 4, 2027, homeowners associations will be expected to set aside 15% of their annual assessment income into reserve funds, up from the current 10% requirement.

Reserve funds are savings accounts used for major repairs and future capital improvements such as:

• Roof replacements
• Parking lot resurfacing
• Exterior painting
• Elevator repairs
• Building maintenance

Why is this important?

Many condo associations already struggle to meet the current reserve requirements. Increasing the minimum to 15% could result in:

• Higher monthly HOA dues
• Special assessments for homeowners
• Changes to association budgets

If an HOA does not meet these lending guidelines, buyers may have fewer financing options because the condominium community could become ineligible for many conventional loan programs.

What This Means for the Condo Market

These updates are intended to make condominium communities financially stronger and reduce the risk of unexpected expenses for homeowners. However, they also place a greater emphasis on the financial health of each individual condo association.

Whether you're buying or selling, it's becoming increasingly important to understand:

• How much the HOA has in reserve funds
• Whether there are any pending special assessments
• If major repairs or deferred maintenance have been identified
• Whether the association's budget meets current lending requirements

Final Thoughts

While these changes may create a few additional steps during the financing process, they are designed to help protect buyers and encourage well-managed condominium communities.

If you're considering purchasing or selling a condo, now is a great time to ask questions about the association's finances before getting too far into the process. Understanding these changes ahead of time can help you avoid surprises and make for a smoother transaction.

As always, if you're thinking about buying or selling real estate in the Upstate, I'm happy to help you understand how changes like these may affect your specific situation.