Will your condo complex be financeable in 2027?

If you sit on a condo association board, or own a unit in one, a pair of rule changes out of Washington could soon decide whether your neighbors can sell their homes at market prices. The changes aren't laws, but in the mortgage world they may as well be.

Roughly half of all U.S. home loans are purchased and packaged into securities by Fannie Mae and Freddie Mac, the two government-sponsored enterprises that set the ground rules for what a "conventional" mortgage looks like. If a loan doesn't meet their guidelines, a lender must either keep it on its own books or sell it as a portfolio or Non-QM loan; options that typically come with higher rates, larger down payments, and stricter terms. In practice, buyers usually walk away.

This year Fannie and Freddie issued sweeping new guidelines aimed squarely at condominium associations, and two of them deserve every board's attention.

The first change has already taken effect. As of August 3, the streamlined "Limited Review" process, a short HOA questionnaire that historically covered roughly 40% of condo transactions, has been retired. Under the old rules, a buyer putting 25% or more down (very common in Coronado) could largely bypass a deep look at the association's finances. That shortcut is gone. Every conventional condo loan on a project over ten units now requires a Full Review, meaning the lender must examine the association's budget, reserves, insurance, delinquencies, pending litigation, and deferred maintenance before it will fund the loan. Smaller projects of ten units or fewer may still qualify for a waiver.

The second change arrives January 4, 2027, and it may prove more consequential. On that date, the minimum reserve allocation an HOA must budget rises from 10% to 15% of the association's annual budgeted assessment income. Some buildings I've seen are still funding well below that threshold. Those boards will need to reallocate from operations or raise dues, neither of which is easy for owners on fixed incomes who have already absorbed years of insurance and repair increases. The old "baseline" funding approach, which lets reserves drift toward zero, and simply manage repairs with special assessments, is no longer accepted.

Why does all of this matter? Because if your association can't clear these guidelines, buyers for your building simply can't get a conventional mortgage. Condos already face real headwinds with rising insurance premiums, balcony and structural inspections mandated, and steadily climbing HOA costs. Losing conventional financing on top of all that is the last thing owners need. Buyers who can't get market-rate loans will look elsewhere, and sellers left to court cash or Non-QM borrowers routinely take a meaningful discount on price.

The practical steps aren't complicated. Boards should calculate their current reserve percentage today and make sure it recommends full or threshold funding rather than baseline. Getting your budget, insurance certificates, meeting minutes, and delinquency reports organized now will save every future sale in the building from getting stuck at underwriting.

Associations that treat the rest of 2026 as a preparation year will keep their financing options, and their property values, intact. The ones that wait will learn, one failed escrow at a time, how quickly a condo can become an all-cash asset.

Jim Nelson has been selling real estate in Coronado for 16 years and is consistently ranked within the top 100 agents across San Diego County. Have a question about real estate? Submit them to jameshnelson@gmail.com and your question could be the subject of a future article.