If you are buying or selling a condominium, there is a significant update you need to know about. On March 18, 2026, Fannie Mae and Freddie Mac issued coordinated guidance through Lender Letter LL-2026-03 and Guide Bulletin 2026-C that changes how condo projects are reviewed, insured, and financed. These are not minor tweaks. They affect whether buyers can get conventional financing on a condo at all.
Here is what changed, what the timelines are, and what it means if you are in the middle of a condo transaction right now.
Why this happened
The 2021 collapse of a condominium building in Surfside, Florida brought serious attention to the problem of underfunded condo associations and deferred maintenance across the country. Since then, Fannie Mae and Freddie Mac have been tightening their standards for which condo projects qualify for conventional financing. The March 2026 updates are the latest and most significant round of those changes.
The goal is straightforward: make sure that any condo project where Fannie Mae or Freddie Mac backed loans exist is financially healthy, properly insured, and structurally sound. The tradeoff is that some condo associations that previously qualified may no longer meet the new standards without making changes.
The end of the limited review process
One of the biggest structural changes in this update is the retirement of the limited review process for established condo projects. Starting August 3, 2026, lenders will be required to conduct a full review on established condo projects instead of the simplified limited review that many transactions relied on previously.
A full review means lenders must verify more documentation about the association, its finances, its insurance, and its physical condition. This adds work to the process and creates more opportunities for a project to be flagged as ineligible. If you are buying a condo, your lender will need to dig deeper into the building's financials before your loan can move forward.
Lenders may begin using the full review process immediately rather than waiting until the August deadline.
Reserve funding requirements are going up
Starting January 4, 2027, condo associations will need to allocate a minimum of 15% of their annual budgeted income to replacement reserves. The current minimum is 10%.
There is an important exception. If a condo association has a reserve study completed within the last three years and is following the highest recommended funding level from that study, the 15% minimum does not apply. However, the baseline funding method is no longer permitted under these new rules. Associations relying on baseline funding need to revisit their reserve plans now.
What this means for buyers: if the association you are buying into does not meet the reserve requirement and does not have a qualifying reserve study, the project may not be eligible for conventional financing.
Insurance requirements got more flexible, with some new limits
Not everything in this update tightens the rules. Several insurance changes actually provide relief to condo associations facing rising premiums and difficult markets.
The agencies have removed the requirement that roofs be insured at full replacement cost value. Actual cash value coverage is now acceptable for roofs under a master property insurance policy. The inflation guard coverage requirement has also been eliminated.
On the deductible side, a new cap of $50,000 per unit will apply to master property insurance policies starting July 1, 2026. Associations currently carrying deductibles above that threshold will need to adjust their coverage.
Individual unit owners will now be required to carry an HO-6 policy when gaps exist in the master policy or when the master policy includes a per-unit deductible. This is an important change for buyers who assumed the association policy covered everything.
The 50% owner occupancy requirement is gone
Freddie Mac has retired the requirement that established condo projects maintain at least 50% owner occupancy for investment property loans. This is a meaningful change for investors and for projects in areas with higher concentrations of rental units. It removes a barrier that previously made some projects ineligible for conventional financing.
What this means if you are buying a condo right now
If you are under contract on a condo or actively shopping, here is the practical takeaway. Your lender will need to verify that the project meets current eligibility requirements before your loan can close. That means looking at the association budget, reserve funding, insurance coverage, and whether the project appears on any ineligible project list maintained by Fannie Mae or Freddie Mac.
Projects that were previously approved under limited review will need to go through full review for loan applications dated August 3, 2026 or later. If your closing is before that date, you may still benefit from the current process depending on your lender's timeline.
The insurance flexibility changes are largely positive for buyers and associations. The reserve funding increase may create challenges for some associations, but there is still time before the January 2027 deadline.
What this means if you are selling a condo
If your building is well managed and financially healthy, these changes may actually help you. Projects that were previously sidelined due to strict insurance requirements may now qualify for conventional financing again, which expands your pool of buyers.
If your association has been underfunding reserves or carrying deferred maintenance, now is the time to address it. Buyers using conventional financing will need lender approval, and lenders will be doing more thorough project reviews. A well-funded, well-insured association is no longer just nice to have. It is a financing requirement.
The bottom line
Condo financing just got more rigorous and in most cases that is a good thing for the long-term health of these communities. But it also means that buyers, sellers, and agents need to understand these requirements before getting too far into a transaction.
If you are purchasing a condo in Texas, Florida, Minnesota, or Colorado and want to understand how these guidelines apply to your specific situation, we are happy to walk you through it. We look at these details on every condo transaction we handle and we will make sure you know exactly what you are working with before you commit to anything.