If you're thinking about buying or selling a condo or townhome, there's an important industry change that could affect your plans.
Beginning August 3, 2026, Fannie Mae and Freddie Mac are implementing significant updates to how they evaluate condominium communities for conventional financing. While these changes are designed to better protect homeowners and lenders, they could make financing more challenging for some communities, particularly those with aging infrastructure or underfunded reserves.
Here's what you need to know.
What's Changing?
Full HOA Reviews Will Become the New Standard
One of the biggest changes is the elimination of the simplified "Limited Review" process.
In the past, many established condo communities could qualify for financing with minimal HOA documentation. Going forward, most projects will require a much more comprehensive review.
Lenders may now request:
HOA budgets
Financial statements
Reserve studies
Insurance information
Meeting minutes
Litigation disclosures
Special assessment information
Deferred maintenance reports
This means more paperwork and more scrutiny before a buyer's loan can receive final approval.
Stronger Reserve Requirements Are Coming
Another major change arrives on January 4, 2027.
HOAs seeking conventional financing will generally be expected to dedicate at least 15% of their annual assessment income toward reserve funding, up from the current 10% requirement (unless they meet an approved reserve study alternative).
For many California communities that have intentionally kept monthly dues low, this could require:
Increased HOA dues
Larger reserve contributions
Special assessments
Updated reserve studies
Why This Matters for Sellers
A condo's value isn't determined solely by its location and condition anymore.
The financial health of the HOA may play an even bigger role in whether buyers can obtain financing.
Communities with:
Low reserve balances
Deferred maintenance
Frequent special assessments
Inadequate insurance
Aging infrastructure
could see a smaller pool of qualified buyers if they don't meet conventional lending standards.
That doesn't mean these homes won't sell—but it may limit financing options and affect marketability.
What Buyers Should Expect
If you're purchasing a condo, don't be surprised if your lender requests significantly more information from the HOA than in years past.
In some cases, buyers may need to consider alternative financing if a project doesn't qualify for conventional lending. These options can include portfolio or non-QM loans, which often involve:
Higher interest rates
Larger down payment requirements
More stringent underwriting guidelines
Understanding a community's financial health before making an offer is becoming increasingly important.
There Is Some Good News
Not every change is more restrictived. The updated guidelines also remove the previous 50% investor concentration limit for many established condo communities. This may actually help some rental-heavy developments qualify for conventional financing when they couldn't before.
Some smaller communities may also benefit from expanded waiver opportunities.
What This Could Mean for San Diego
These changes may have the greatest impact on:
Older beach-area condo communities
Communities built during the 1970s through the 1990s
Self-managed HOAs
Developments that have historically kept HOA dues artificially low
Well-managed communities with healthy reserves and proactive maintenance will likely experience very little disruption beyond providing additional documentation.
Planning to Buy or Sell?
Whether you're preparing to list your condo or considering a purchase, it's more important than ever to understand the financial health of the HOA.
Questions worth asking early include:
How much of the HOA budget is allocated to reserves?
Is there a current reserve study?
Are there any pending or planned special assessments?
Has deferred maintenance been addressed?
Is the community likely to meet conventional financing requirements?
Having these answers before a home goes on the market can help prevent surprises during escrow and keep transactions moving smoothly.
We're Here to Help
These new lending guidelines don't mean buying or selling a condo will become impossible—but they do make preparation more important than ever.
If you're considering buying or selling a condo or townhome in San Diego, we'd be happy to review your community, discuss how these changes may affect your property, and help you navigate the process with confidence.
Have questions about your HOA or your home's marketability? Contact Team Kolker Wendlandt today. We're here to help you stay one step ahead.
