Big Condo Lending Changes Are Here — And They Matter

As of July 1, 2026, one of the biggest condo lending changes officially took effect: Fannie Mae and Freddie Mac now limit the deductible for master Insurance policies to $50,000 per unit for required property Insurance coverage. That may sound like a small technical change, but it can have a major impact on condo buyers, sellers, real estate agents, and HOA communities. Many condo associations, especially in California, have been hit hard by rising Insurance costs. To keep monthly HOA dues from increasing too much, some associations have accepted higher deductibles on their master Insurance policies. That may help control monthly costs, but it can now create a serious financing issue if the deductible is too high. And this is only the beginning.

Starting August 3, 2026, Fannie Mae and Freddie Mac are also retiring the easier Limited Review process for many condo projects. This means more condos will require a deeper Full Review, where lenders look more closely at the HOA budget, reserves, insurance, litigation, deferred maintenance, special assessments, and overall project health.

What Is Changing?
The biggest changes are:
1. Insurance deductibles are now capped at $50,000 per unit.
If the master policy deductible is too high, the condo project may not qualify for conventional financing.
2. Limited Review is going away.
More condo projects will need a Full Review, which means more documentation and more scrutiny.
3. Reserve study rules are getting stricter.
If an HOA has a reserve study, the budget must properly support the recommended reserve funding.
4. Reserve requirements are increasing.
Beginning January 4, 2027, the minimum reserve contribution for Full Review projects increases from 10% to 15% of the HOA’s annual budgeted income.
5. The 50% investor concentration limit is being removed for certain non-owner-occupied condo loans.
This is one of the more positive changes. In the past, if more than 50% of the units in an established condo project were investor-owned, that could create an issue for non-owner-occupied financing. With this change, that 50% investor concentration limit is being removed for established condo projects reviewed under Full Review.

Why Are These Changes Happening?
Fannie Mae and Freddie Mac are working to ensure condo projects are financially healthy, properly insured, and prepared for future repairs. After years of rising Insurance costs, deferred maintenance concerns, large special assessments, and structural safety issues, lenders are paying much closer attention to the financial condition of condo associations. In simple terms, they want to know that the building is being maintained, the HOA has enough money set aside, and the Insurance coverage is strong enough to protect the owners.

The Positives
Stronger reserve requirements can lead to healthier HOA communities. Better Insurance review protects owners and lenders. Buyers should have greater transparency into the project’s condition before purchasing. Well-run condo associations may stand out more in the market.
There is also a positive change for some investor buyers: Fannie Mae and Freddie Mac are removing the 50% investor concentration limit for established condo projects reviewed under Full Review. That means some non-owner-occupied condo loans may qualify even when more than half of the units are investor-owned.
Long-term, these rules are designed to protect buyers from walking into projects with weak reserves, major repair issues, poor Insurance coverage, or surprise special assessments.

The Negatives
The downside is that some condo deals will get harder and more projects will be non-warrantable
More projects will require Full Review. More HOA documents will be needed. Insurance policies will be reviewed more carefully. Some associations may need to raise dues or increase reserves. And some projects that previously qualified may no longer be eligible for standard conventional financing.
This can impact buyers because they may find out a condo does not qualify after they are already in escrow. It can impact sellers because financing issues can shrink the buyer pool. And it can affect agents, as condo transactions may require more work upfront.

The most important thing is to review the condo project early. We have a system in place to do that, but I am not sure other lenders do!

Buyers should make sure their lender checks the HOA budget, Insurance deductible, reserves, litigation, special assessments, and any major repair issues as soon as possible.
Sellers should ask their HOA or management company whether the project currently meets Fannie Mae and Freddie Mac guidelines.
Agents should treat condo project approval as a major part of the transaction, not something to check at the last minute.

At the end of the day, this will mean more condos will be difficult to finance through conventional lending sources, and we will continue to do non-warrantable condos in those cases. What’s the old saying? Worse before better? I hope better comes along someday! LOL!

Interest Rates
Rates moved slightly higher earlier this week, but today was a better day after the June jobs report came in weaker than expected.
The key number was Non-Farm Payrolls, which showed only 57,000 new jobs, well below expectations of about 110,000. Slower job growth usually helps rates because it points to a cooling economy. The unemployment rate improved slightly to 4.2%, but the market focused more on the weaker hiring number.
The 5-day rate chart shows exactly what we have been feeling: rates were under pressure earlier in the week, but improved today after the jobs report.
In the future, rates will likely remain volatile. If inflation continues to cool and the job market keeps softening, we could see rates improve. But one strong inflation report can still push rates higher quickly.

For buyers, the message is simple: don’t try to perfectly time rates. If the right home comes up, buy it, structure the loan correctly, and refinance later if rates improve. Waiting for the “perfect rate" often means missing the right house.

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s –
• Conventional (≤ $832,750): low 6s
• High-balance: mid to high 6s
• Jumbo: Mid 6s
• Bridge Loans  7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Buydowns Available (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money
• Construction Loans
• 203K loans
• Commercial Loans
• Fix and Flip Loans

Rates subject to change without notice.

Condo Update

Good news:

Bad news:

• Del Prado  – Newhall – Critical Repairs – Deferred maintenance
• Palisades -  25730 Armstrong Stevenson Ranch CA 91381 – Critical repairs   – Deferred maintenance  – reserves  –  Insurance!  Yes, they hit just about every bad thing you can!  LOL!

We love your Non-Warrantable Condo loans!!
Need help checking a condo? Call me, and we can look it up in real time.
Also:

Full California "naughty list" available here:

https://mikemeena.com/non-warrantable-condos/

Let's Connect

If you or your clients, friends, or family need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,