Four changes that could kill the deal when buying or selling a condominium.
BOULDER PROPERTY ADVISORS
Tamara Grosvenor, Realtor® J.D. | Trusted Real Estate Advisor
A condominium is more than the unit itself. Whether you are buying or selling, the homeowners association (HOA), its finances, insurance, maintenance, and other conditions can affect whether a buyer can obtain conventional financing or needs a non-qualified mortgage (non-QM). Understanding these issues early can help sellers prepare to bring their property to market, and buyers make informed decisions.
August 3, 2026: An Important Change for Condo Buyers and Sellers
For applicable loan applications dated on or after August 3, 2026, the Limited Review option was retired for Fannie Mae and Freddie Mac loans. This option allowed some buyers putting 20% or more down to avoid a review of the HOA. A condominium project that previously might have qualified under Limited Review generally must now meet the requirements of the applicable Full Review process or another available review path.
There is also a separate reserve-funding change coming on January 4, 2027. For applicable Fannie Mae and Freddie Mac loans, the minimum replacement-reserve allocation will increase from 10% to 15% of annual budgeted assessment income (HOA dues) for loan applications dated on or after January 4, 2027.
What These Changes Mean for Buyers and Sellers
For buyers, the condominium project may need to meet applicable eligibility requirements in addition to your own financial qualifications. Fannie Mae and Freddie Mac conforming loans are generally among the most cost-effective financing options available to qualified borrowers. If a condo project does not qualify for the intended conforming loan, other financing may still be available, but non-conforming or non-QM financing can cost more because of a higher interest rate or other loan costs.
For sellers, a condo project’s eligibility can affect the pool of buyers who can finance the purchase on competitive terms. HOA issues may affect how a property should be priced, positioned, and marketed. Identifying potential problems before listing is preferable to discovering a financing issue after a buyer is under contract and has spent money on inspections or an appraisal.
What Lenders will be reviewing:
1. HOA Insurance
The association needs appropriate master insurance coverage that satisfies applicable lender requirements. An insurance problem can affect whether a conventional lender can finance a unit in the project.
Sellers should gather current insurance information and make it available for review as part of preparing the condo for sale. Buyers will not be authorized to do so.
Buyers should ask whether the association has appropriate master insurance coverage and whether the lender has reviewed it for the type of financing the buyer intends to use.
2. Reserve Contributions and the HOA’s Financial Condition
The association’s budget and reserves matter because lenders evaluate the project’s financial health. A condo project with inadequate reserves, significant deferred maintenance, or other financial concerns may create financing challenges.
For applicable Fannie Mae full review loans, the minimum replacement-reserve allocation increases from 10% to 15% of annual budgeted (HOA dues) assessment income for loan applications dated on or after January 4, 2027. Associations may need to adjust budgets or contributions to meet reserve needs and address rising expenses. I believe monthly HOA fees will increase, although the amount and timing will depend on the individual association.
Sellers should review these documents before listing so that potential questions about reserves, dues, or assessments can be identified early.
Buyers should ask to review the HOA’s current budget and financial information, how much is being allocated to reserves, whether dues increases are planned, and whether special assessments are current or anticipated.
3. Litigation and Building Condition
Pending litigation, critical repairs, structural concerns, deferred maintenance, special assessments, and major renovation projects may warrant closer review. Not every lawsuit automatically makes a project ineligible; the nature and significance of the litigation matter.
Sellers should gather relevant HOA documents and identify known issues before going to market. If a condo was previously listed but did not sell, it may be worth checking whether HOA condition, insurance, reserves, or financing eligibility contributed to the difficulty.
Buyers should ask whether the association is involved in pending litigation, whether there are deferred maintenance or structural issues, whether the building has had a recent inspection or engineering report, and whether major repairs or improvement projects are underway or planned.
What If the Condo Does Not Qualify for Conventional Financing?
A financing problem does not automatically mean the buyer must walk away or that the condo cannot be sold. The first step is to understand why the project does not qualify and what alternatives may be available. Non-conforming or non-QM financing may be available in some circumstances, but it can cost more than conforming financing. Depending on the loan program and lender requirements, a seller concession may sometimes be used toward a rate buydown, potentially reducing some of the buyer’s financing costs.
Sellers can prepare before listing. The lender and the applicable loan program determine loan eligibility and pricing. They can gather information and work with a lender to determine their status. They may also consider offering a concession if the HOA causes the property to be a non-QM. The key is to identify the issue early.
Buyers can ask questions before making an offer. They can write their contract for loan approvals to occur before inspections and appraisals to avoid needless expenses.
A Helpful Fannie Mae Tool
Fannie Mae’s Condo Status Finder is a resource that can help eligible HOAs, management companies, and authorized advisors identify potential project eligibility issues:
Sellers and Buyers should not rely on the status finder, and both should consult with lenders.
Buying or Selling a Condo in Boulder County?
My approach is to look beyond the unit itself and help identify HOA and financing questions that may affect the transaction. Sellers can prepare before bringing a property to market. Buyers can ask the right questions before writing an offer. I can help you evaluate the property, organize questions and documents, and coordinate with your lender or other appropriate professionals.
If you are considering buying or selling a condo in Boulder, Louisville, Lafayette, Erie, Longmont, Broomfield, or elsewhere in Boulder County, contact me for more information.
Tamara Grosvenor, Realtor® J.D.Boulder Property AdvisorsTrusted Real Estate Advisor | Transition Advisor
Disclaimer: This article is for general real estate information and is not mortgage, legal, or financial advice. Loan eligibility and pricing are determined by the lender and the applicable loan program. This is not intended to be legal or tax advice.
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