New Fannie Mae and Freddie Mac Condo Rules: What Buyers and Owners Need to Know

On March 18, 2026, Fannie Mae and Freddie Mac announced the largest update to their condo project rules in years. Fannie Mae laid out the details in Lender Letter LL-2026-03 (see its project standards FAQs), and Freddie Mac made matching changes to its own guide. Some changes took effect right away. Others phased in over the summer, and one more arrives on January 4, 2027.

If you're buying a condo, own one, or sit on an HOA board, these rules affect whether a building qualifies for conventional financing. That affects how easy a unit is to buy and sell.

The Short Version: Key Dates

Dates apply to the loan application date, not the closing date.

1. The Quick Condo Review Is Gone

For years, many buyers of primary residences could close on a condo with a light review of the building called a Limited Review (Freddie Mac's version was the Streamlined Review). For applications dated on or after August 3, 2026, those shortcuts are retired. Most condo projects with more than 10 units now need a Full Review.

A Full Review means the lender looks harder at the HOA's budget, reserves, insurance, delinquencies, and litigation. Expect more paperwork from the association and a little more time. The fix is simple: request the HOA questionnaire and budget as soon as you're under contract.

2. Small Buildings Get a Break

The project review waiver now covers new and established condo projects with 10 or fewer units. Buildings with 5 to 10 units qualify only if they are not part of a master association or a larger development. This helps boutique buildings and small infill projects, which are common in older central neighborhoods and East Austin.

3. Investor-Heavy Buildings Can Qualify Again

The old rule that blocked investment-property loans when more than half the units in an established project were rentals has been retired for projects under Full Review. That reopens conventional financing for many buildings near universities and downtown cores. One caution: new and newly converted projects still need at least half the units sold to owner-occupants or second-home buyers.

4. Insurance Rules Tightened and Loosened

For applications dated on or after July 1, 2026, the HOA's master policy can't carry a per-unit deductible above $50,000. When the master policy has a per-unit deductible, the buyer's HO-6 policy must cover at least that deductible. Unit owner policy deductibles are also capped.

On the flexible side, roofs no longer have to be insured at full replacement cost. They can be covered on an actual cash value basis, as long as the rest of the building still has replacement cost coverage. Given how fast insurance costs have climbed, that's real relief for many associations.

5. Reserves Go Up in January 2027

This is the change HOA boards are watching most closely. For applications dated on or after January 4, 2027, a building under Full Review must budget at least 15% of its annual assessment income for replacement reserves, up from 10%. A project with a recent professional reserve study, funded at the study's highest recommended level, can meet the requirement that way instead.

Associations still budgeting near 10% have a decision to make: raise dues, commission a reserve study, or risk the building becoming non-warrantable. That matters to every owner, because a non-warrantable building has fewer buyers who can get conventional financing.

What This Means for Condo Buyers

• Screen the building before you offer. A quick review of the budget and insurance can save your earnest money and your timeline.
• Read the resale certificate closely. In Texas it shows the budget, reserves, assessments, and lawsuits. Look for a reserve plan that reaches 15%.
• Watch your application date. If you're shopping around the holidays, an application before January 4, 2027 is reviewed under the current reserve rule.
• Have a backup program. FHA, VA, and portfolio lenders follow their own condo standards, so a building that fails one review may pass another.

What This Means for Owners and Sellers

If you plan to sell in the next year or two, ask your board where the reserve budget stands and whether a reserve study is planned. A building that stays warrantable keeps the widest pool of buyers. Owners thinking about refinancing should know the project review applies to refinances too. If replacing your first mortgage doesn't make sense, a HELOC may be another way to access equity.

What About FHA and VA?

These changes apply to conventional loans sold to Fannie Mae and Freddie Mac. FHA and VA keep their own condo approval processes. FHA approves projects and also offers Single-Unit Approval in some cases, and VA keeps its own list of approved projects. The full breakdown of each program lives on my companion site, Condo Financing Guide.

The Bottom Line

The 2026 condo rules make lenders look harder at a building's finances and insurance, while opening doors for small buildings and investor-heavy communities. Buyers who check the building early, and owners whose boards plan ahead for the 15% reserve rule, will have the smoothest path.

Sources: Fannie Mae Lender Letter LL-2026-03 (March 18, 2026) and Selling Guide updates; matching Freddie Mac guide updates. Requirements can change and individual lenders may add their own overlays. This article is educational and is not a commitment to lend.