Condo Financing Just Got More Complex: What Los Angeles Buyers, Sellers, and HOAs Need to Know
New Fannie Mae and Freddie Mac condo-lending rules may mean more documentation, longer closings, and stricter HOA reviews. Learn what LA condo buyers, sellers, and HOAs should prepare for.
Jimmy Vibert
8/7/20263 min read
Buying or selling a condominium has always involved more than evaluating the individual unit. Now, the financial health, insurance, maintenance planning, and documentation of the entire condominium association can play an even larger role in whether a buyer’s loan is approved and how smoothly the transaction reaches closing.
Effective August 3, 2026, Fannie Mae and Freddie Mac retired the streamlined “Limited Review” option for many condo loans. Unless a project qualifies for a waiver of project review, lenders must now use a more comprehensive Full Review of the condominium.
What has changed?
Under the prior Limited Review process, some buyers could obtain conventional financing with a less extensive review of the homeowners association (HOA) and the condominium project. That pathway was used in a significant share of financed condo purchases.
Now, a Full Review generally requires lenders to take a closer look at items such as:
The HOA’s operating budget and reserve funding
The building’s insurance coverage
Delinquent homeowner assessments
Pending litigation or special assessments
The building’s physical condition and any known repair concerns
Reserve studies and the association’s maintenance plans
The intent is positive: identify properties with financial, insurance, structural, or deferred-maintenance risks before a buyer becomes an owner. But the practical effect may be a longer underwriting timeline, more HOA documentation requests, and, in some cases, a loan denial if the project does not meet agency.
The reserve requirement is increasing
A second major change arrives for loan applications dated on or after January 4, 2027. In a Full Review, condominium associations generally will need to allocate at least 15% of their annual budgeted assessment income to replacement reserves for capital expenditures and deferred maintenance—up from 10%.
There may be an alternative path for associations with a qualifying, current reserve study that supports the budgeted funding level. However, the agencies are placing greater emphasis on reserve studies and no longer permit a baseline funding method that allows reserves to approach.
For owners, that could eventually mean higher HOA dues. For buyers, it may mean a healthier association that is better prepared for major repairs rather than relying on unexpected special assessments.
What this means for buyers
The condo itself is no longer the only property being underwritten. A well-qualified buyer can still encounter a financing obstacle if the building’s HOA records, insurance, reserves, or condition do not satisfy the lender’s project-review requirements.
If you are considering a condo purchase, take these steps early:
Ask for the HOA budget, reserve study, insurance certificate, CC&Rs, and recent meeting minutes as soon as possible.
Review whether the association has discussed major repairs, water intrusion, litigation, insurance changes, or special assessments.
Build additional time into the escrow timeline for lender review of the project.
Work with a lender who regularly handles condominium financing and understands project eligibility.
Do not wait until the final days of underwriting to learn whether the building is financeable.
The best time to identify a project issue is before removing contingencies—not when a loan approval is expected. Realtor.com’s reporting similarly notes that requesting HOA financial and insurance materials early can help prevent a late-stage project.
What this means for sellers and HOAs
For sellers, a buyer’s financing can now depend even more heavily on documents controlled by the HOA. Proactively gathering the HOA package, budget, reserve study, insurance information, meeting minutes, and disclosures can help reduce avoidable delays once a buyer enters escrow.
For HOA boards and property managers, clean and accessible records are becoming a competitive advantage. Associations should consider reviewing:
Whether their reserve study is current and reflects realistic repair costs.
Whether their annual budget supports the recommended reserve funding level.
The adequacy of master insurance policies and deductibles.
Delinquency levels, pending litigation, and unresolved maintenance issues.
Their process for responding quickly to lender, escrow, and buyer-document requests.
Not every condo project will face the same outcome. Some smaller projects may qualify for a waiver of project review, and certain eligibility rules have also been eased. Still, the direction is clear: condominium associations will be subject to more scrutiny in conventional financing.
A smarter approach to condo transactions
Condominiums can remain an excellent ownership and investment opportunity throughout Los Angeles from first-time buyer options to luxury, amenity-rich residences. But today’s successful condo transaction requires early due diligence on both the unit and the association behind it.
If you are planning to buy, sell, or evaluate a condominium property, I can help you assess the market opportunity, identify potential HOA-related red flags early, and coordinate with the right lending and escrow professionals.
Connect with us today!
Thinking of Buying? or Selling?
Email: info@jimmyvibert.com
Phone: 818-334-6987
This article is for general informational purposes only and is not legal, financial, insurance, lending, or HOA-management advice. Loan eligibility is determined by the lender and applicable underwriting requirements.