Fannie Mae and Freddie Mac retired the Limited Review shortcut for established condo projects on August 3, 2026, forcing nearly every conventional loan to depend on a deep review of the building's finances. The good news: small buildings of 10 or fewer units can skip project review, and the 50% investor cap is gone. The catch to plan for: starting January 4, 2027, HOAs must set aside 15% of budgeted assessment income for reserves, or the building goes non-warrantable. I've watched condo deals fall apart in Colorado, New Mexico, and other areas over missing HOA paperwork, so here's what to check before you write an offer.
August 3, 2026, Retired Limited Review
Fannie Mae issued Lender Letter LL-2026-03 on March 18, 2026, and Freddie Mac matched it with Bulletin 2026-C. Most changes took effect for loan applications dated on or after August 3, 2026. The headline shift: Limited Review is retired.
Limited Review historically covered roughly 40% of all condo project reviews, representing the path that let a qualified buyer with a larger down payment close without the lender scrutinizing the HOA's finances. As of August 3, that option is gone for established projects, and every purchase needs either a Full Review or a qualifying Waiver of Project Review.
A Full Review looks well beyond the borrower's credit and down payment to the health of the entire association: budget, reserve funding, delinquent assessments, insurance, deferred maintenance, special assessments, litigation, and the project's physical condition. The trigger is the loan application date, not the closing date, so an application dated before August 3 can still close under the old path.
The upside: small buildings and investor-heavy projects just got easier
Not all of this is bad news. The rule changes actually loosened financing for two buyer groups that used to struggle.
Small buildings (10 units or fewer) can skip project review. Waiver-of-review eligibility expanded to new and established projects with 10 or fewer units. If you're shopping a modest low-rise home or a four-unit conversion, your lender can often approve it without the full HOA paperwork grind, but don't assume it automatically: the waiver still requires meeting specific criteria, so have the lender confirm it early.
The 50% investor cap is gone. Fannie Mae retired the 50% investor concentration limit for established condos under Full Review, effective with Lender Letter LL-2026-03. That's big for rental-heavy buildings and the buyers who like them. A complex where half or more of the units are investor-owned can now get conventional financing again. Two cautions: individual lenders can still impose their own stricter limits, and the separate single-entity rule (one person or company owning more than 20% of units in a 21+ unit project) still applies.
The 2027 reserve cliff you need to watch
The change most likely to bite is coming later. Starting January 4, 2027, associations must budget 15% of their annual budgeted assessment income toward replacement reserves, up from 10%. It is the reserve allocation divided by the association's annual budgeted assessment income, which includes regular common expense fees.
A building that falls below that threshold and can't rely on a qualifying reserve study becomes non-warrantable, meaning no conventional mortgages for any unit, not just yours. In practice this is a budget-line test, not a funding mandate: lenders check the reserve line in the HOA budget, and only if that fails does the reserve study become the alternate path.
The real-world effect for buyers: many associations sitting at the 10% floor will raise dues to hit the new number, so budget for higher HOA fees in 2027 — GoverningDocs' analysis of 1,900+ association documents found many currently operate right at the old floor, with less than a year to adjust (GoverningDocs). If the board has no plan to increase reserves, treat that as a red flag: the building could lose warrantable status and leave you without conventional financing options.
Five Documents to Request Before You Make an Offer
The building's paperwork now decides whether your loan closes, so verify it before you fall in love with the unit. Here's the checklist I run with condo buyers.
Request the HOA's current budget and confirm the reserve allocation percentage. If it's below 15%, ask the board directly whether they plan to raise it before January 2027. No plan is a red flag.
Ask for the reserve study. Fannie Mae requires a current, credible study, generally dated within 36 months of the review, especially for buildings leaning on it to fund below the default threshold. A building with a strong, recently updated study will sail through; an outdated one may force the default rule or trigger ineligibility.
Verify insurance coverage. Lenders now check master coverage more closely, and per-unit deductible caps apply. Ask whether the building's master policy carries replacement-cost coverage and what the deductible is.
Ask about pending special assessments and upcoming capital projects. A board planning a major roof or facade repair often passes a special assessment that can blow up a buyer's budget or trigger lender scrutiny. Get the board minutes for the last two meetings to spot anything in the pipeline.
Start the review as early as you can. Full Reviews need more HOA documentation, and many associations are slow to respond. Waiting until underwriting to request documents is how deals die. Your financing contingency will hinge on the project passing, not just your own credit.
Bottom line: the building now matters as much as the buyer. Check the HOA's finances before you commit, and a strong condo will finance cleanly. One that's behind may cost you the deal no matter how qualified you are.
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