This guide focuses on the Fannie Mae-Freddie Mac Condo guidelines on conventional loans. These guidelines enable eligible borrowers to secure conventional condominium loans with a down payment as low as 3%. One of the primary draws of condominiums is their low-maintenance nature compared to single-family homes. Tanhia Romero, NMLS 489760, is a loan originator at Gustan Cho Associates and an associate contributing editor at GCA Mortgage Forums, and says the following:

Condominiums have seen a surge in popularity in recent years, attracting various demographics, including seniors, millennials, and single, unmarried individuals.

Low maintenance on condos appeals to homeowners who travel frequently or leave their residences unattended for extended periods, as condos offer added security. It’s important to note that purchasing a condo involves certain risks, which lenders acknowledge through additional loan-level pricing adjustments, resulting in higher interest rates than single-family homes. In this blog, we will explore the particular standards and instructions given by Fannie Mae and Freddie Mac for buying condominiums with conventional loans. In this guide, we will cover Fannie Mae-Freddie Mac condo guidelines on conventional loans.

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Understanding Fannie Mae-Freddie Mac Condo Guidelines

Condo loans operate under distinct parameters compared to single-family home lending, as the Fannie Mae-Freddie Mac Condo Guidelines dictated. These guidelines outline stringent criteria that the borrower and the property must meet—initial qualification hinges on the borrower’s eligibility, followed by a thorough assessment of the condominium project. Condos must satisfy the requirement of being warrantable, ensuring compliance with regulatory standards.

Adherence to warrantable condo HUD Guidelines necessitates that the condominium complex boasts at least 51% owner-occupancy.

Conversely, if the ratio of non-owner occupants surpasses 51%, the condo is classified as non-warrantable. Such non-warrantable condos need more support for conventional loans, creating a financing challenge for prospective buyers. However, Gustan Cho Associates offers tailored financing solutions for non-warrantable condominiums, requiring a 20% down payment to proceed with the loan process.

Fannie Mae and Freddie Mac Condo Guidelines for Conventional Loans in 2026

In 2026, Fannie Mae-Freddie Mac Condo Guidelines require review of both the borrower and the condo project, including HOA finances, reserves, insurance, building condition, lawsuits, special assessments, commercial use, and ownership. A key change is the expansion of review waivers for smaller projects and the removal of the Limited and Streamlined Review options.

Purchasing a condominium with a conventional mortgage differs from buying a single-family home. Strong credit, steady income, a good debt-to-income ratio, and sufficient savings do not guarantee mortgage approval.

The condo project’s status ultimately determines eligibility for Fannie Mae and Freddie Mac loans. Understanding the need for both borrower and project approval is essential for condo buyers. Buyers must be approved by the lender, and the condominium project must also meet conventional mortgage requirements. Fannie Mae states that project-level risks are not tied to credit risks for individual borrowers.

What Changed in the 2026 Fannie Mae-Freddie Mac Condo Guidelines?

Condominium lending underwent several significant changes in 2026. For the mortgage to be sold to Fannie Mae, the lender must assess several factors related to the project, including the project’s finances, physical condition, insurance coverage, legal structure, ongoing lawsuits, management, and other related concerns. This guide summarizes the 2026 updates to help buyers, sellers, and real estate agents understand their impact on conventional condominium financing.

Limitations of Fannie Mae’s Limited Review

Fannie Mae’s Limited Review process has been discontinued. Projects that were previously evaluated under Limited Review must be evaluated under the applicable Full Review process or Waiver of Project Review for mortgage applications dated on or after August 3, 2026.

This is important because many older resources may still reference Limited Review.

Fannie Mae Continues to Broadly Interpret the Waiver of Project Review

Fannie Mae continues to broaden the criteria for granting mortgage loans without a Project Review. Under the existing Selling Guide, there is a waiver for project reviews for units in qualifying two to ten-unit condominium projects. Attached units in five- to ten-unit projects are generally eligible for the waiver when the project is not part of a larger or master-planned development. Detached condominium projects are also eligible for waivers of project reviews. A waiver does not allow lenders to ignore project concerns. Lenders must still meet property, insurance, legal, and transaction requirements.

Freddie Mac Adjusted Its Framework for Condo Review

Like Fannie Mae, Freddie Mac also amended its Small Project Exemption and expanded more of its Project Review Guidelines for smaller condominium projects as well. Per Freddie Mac’s current guidelines, or at least until August 3, 2026, Streamlined Review will no longer be an acceptable option for projects that are attached units in five to ten-unit projects that are part of a master planned association.

Borrowers should avoid using outdated condominium questionnaires or forms from previous years due to these changes.

Borrowers of a Conventional Condo Loan

A conventional condo loan requires multiple layers of review. The loan is first layered when a lender underwrites a borrower. The review includes the conventional loan underwriting and an analysis of the borrower’s income, employment, assets, credit, debts, and reserves.

The second layer is a review of the unit for normal property requirements. The final layer is the review of the condominium project, when required. Project risk is distinguished by Fannie Mae from borrower credit risk.

Documentation for the project may include budgets for homeowner associations, financials, reserve studies, insurance, legal documents, engineering reports, condominium questionnaires, and related documents. Since Fannie Mae evaluates project risk separately, borrowers may receive mortgage preapproval but encounter project-related issues after signing a contract.

Warrantable Condo?

A warrantable condo is a unit or project that meets Fannie Mae or Freddie Mac criteria for conventional financing. Non-warrantable condos have features that do not meet agency requirements, such as issues with finances, insurance, structure, litigation, concentrated ownership, hotel operations, legal documents, or other project-level concerns. A non-warrantable condo does not necessarily have physical issues; it simply does not meet conventional agency financing requirements.

Requisite Down Payment for Conventional Condos

The required down payment for conventional condo financing depends on property use, loan program, automated underwriting, borrower qualifications, and other relevant factors.

Primary Residence Condo With as Little as 3% Down

For certain eligible Fannie Mae conventional loans, financing is available up to a 97% LTV ratio for a one-unit principal residence, including eligible condominium units. Therefore, a borrower may be able to purchase an eligible condo with as little as a 3% down payment. Freddie Mac offers similar options, including certain 97% LTV options, such as qualifying Home Possible loans.

A 3% down payment does not guarantee approval. The borrower, transaction, loan program, and condo project must all meet eligibility requirements.

Second-Home Condo Down Payment

Fannie Mae’s current standard eligibility matrix allows a 90% LTV for a one-unit purchase of a secondary home, which typically means a minimum 10% down payment, in line with the standard maximum LTV. Freddie Mac has also listed a maximum LTV of 90% for eligible secondary home purchases in its standard conforming requirements.

Investment Condo Down Payment

It is a common misconception that conventional investment condos require a 20% down payment. Under Fannie Mae’s August 2026 standard eligibility matrix, financing may be up to 85% LTV for a qualifying purchase of a one-unit investment property. Freddie Mac also has a maximum LTV of 85% for qualifying one-unit investment property purchases. Individual lenders may impose more restrictive underwriting requirements, known as lender overlays.

Fannie Mae Condo Project Review Requirements

Fannie Mae has several methods to determine a condominium project’s eligibility.

Summary

A Full Review is typically conducted for both new and existing condo projects.
Lenders assess whether a condo project meets requirements, often using the Fannie Mae Condo Project Manager (CPM) system.
Fannie Mae stipulates that lenders will review project documents and ensure accurate input in CPM.

Waiver of Project Review

Certain projects and transactions may qualify for a Waiver of Project Review.
By 2026, this category may include qualifying two- to ten-unit condo projects, refinances, and other eligible transactions. Five- to ten-unit attached projects within a larger development or master association have different review requirements.

Project Eligibility Review Service

The Project Eligibility Review Service (PERS) is available to Fannie Mae on a case-by-case basis. This may include the review of new, new-conversion, shared-equity, special-purpose, or other types of projects requiring a Fannie Mae review.

Freddie Mac Condo Project Review Requirements

Freddie Mac’s rules are similar to Fannie Mae’s, but should not be assumed identical. Freddie Mac also uses its Condo Project Advisor system to assist lenders in determining a condominium project’s eligibility.

The system can deliver findings for surveyed projects and identify challenges relating to commercial real estate, lawsuits, reserve funding, delinquent assessments, single-owner situations, and other project-related issues.

Depending on the project and the transaction, Freddie Mac may issue an Exempt From Review decision or may mandate that the lender evaluate the compliance with another applicable review option. A condo that fails one agency’s standards may still meet the other’s; do not assume identical outcomes.

HOA Reserve and Budget Requirements

The financial health of the homeowners’ association is a key factor in conventional condo financing assessments.

Current Fannie Mae Reserve Requirement

For a Fannie Mae Full Review, at this time, the project’s HOA budget, as a general standard, must provide funding for capital replacement reserves and deferred maintenance at a level of at least 10% of the assessment income, unless a reserve study, acceptable to Fannie Mae, supports an alternative approach.

Effective August 3, 2026, Fannie Mae reserve study standards have changed. When a qualifying reserve study is adopted, the budget must follow its recommendations. The baseline funding method no longer allows avoidance of the standard reserve requirement.

A 15% Fannie Mae Reserve Requirement Will Occur in 2027

One important future change bears mention.

Fannie Mae has updated the Full Review process, increasing the minimum reserve allocation from 10% to 15% for loan applications dated on or after January 4, 2027.
References stating that ‘10% is always the rule’ will soon be outdated.
Freddie Mac’s current condo guidance also uses a 10% replacement-reserve benchmark in applicable project reviews and permits qualifying reserve studies under its criteria.
HOA delinquencies can negatively impact the approval of a condo project.
A high number of condominium association owners who are delinquent in payment of their HOA obligations can cause a project to fall short of traditional standards.
As stated in the Fannie Mae Selling Guide under the Full Review requirements, no more than 15% of project units may be at least 60 days delinquent in payment of common expense assessments.
Fannie Mae also uses the 15% standard for units that are at least 60 days delinquent in payment of special assessments.
Freddie Mac also evaluates HOA assessment delinquency as part of its applicable project reviews.
High delinquency rates can reduce the HOA’s ability to pay insurance premiums, maintain property, and cover utilities and other expenses.
The most significant element in the underwriting of condominium mortgages in recent years has been the evaluation of structural conditions.
Fannie Mae may consider a project ineligible if it contains significant problems with safety, soundness, structural integrity, or habitability.
According to the Fannie Mae Selling Guide, unaddressed critical repairs reported in an inspection or engineering report would make a project ineligible until such repairs are completed and properly reported.
In such instances, lenders may request engineering reports, inspection reports, repair records, special assessment records, HOA meeting minutes, and similar documents.

This is particularly important for older condo buildings.

Condos and Insurance

Reviewing condos requires understanding the insurance requirements, as with other aspects of the project. Fannie Mae generally requires that project common areas and residential buildings be included in a master property insurance policy unless the project’s legal documents mandate qualifying individual property insurance.

Depending on the policy, the borrower may need individual insurance for each condominium unit. The lender is responsible for assessing if the insurance prerequisites have been met.

A financially healthy condo project may still face mortgage issues if its insurance coverage does not meet the requirements of the agency and the lender. Buyers should not assume an HOA’s master policy meets conventional mortgage requirements.

Conventionally Underwritten Loans and Litigation

Not all litigation will automatically preclude a condominium project from receiving a conventional loan. However, the nature of the litigation is important. Fannie Mae considers projects ineligible when litigation involves the HOA, developer, or sponsor and addresses the safety, structure, or use of a project.

Certain minor litigation may be acceptable to the lender if the financial impact is minimal, insurance adequately addresses the situation, or the litigation does not affect the project’s safety or finances.

Lenders must appropriately document their analysis. Construction-defect litigation is a prime example of the more complex litigation that is often the focus of each lender’s underwriting.

Special Assessments and Condo Financing

A special assessment provides for a charge to the owners of a condo in addition to regular HOA dues. Special assessments do not automatically create ineligibility.

The lender must determine why the assessment was levied, how much remains unpaid, whether owners are paying the assessment, how long the assessment will remain in place, and see the problem involves repairs.

If the special assessment relates to a deferred critical repair, Fannie Mae may deem the project ineligible until the issue is addressed. Potential buyers should inquire about special assessments during the offer phase, not just before closing.

What Are Condo Hotels

In addition to catering to non-warrantable condos, Gustan Cho Associates extends their financial services to include condotel financing, requiring a down payment of 25%. This demonstrates their commitment to providing comprehensive financing options tailored to diverse real estate scenarios. By offering specialized solutions for non-traditional properties, Gustan Cho Associates empowers borrowers to navigate the complexities of condo financing with confidence and ease.

Fannie Mae-Freddie Mac Condo Guidelines and Requirements

The Fannie Mae-Freddie Mac Condo Guidelines outline the eligibility criteria for condominium financing, and both agencies maintain similar requirements. Under these guidelines, borrowers may qualify for conventional loans with a down payment as low as 3% for owner-occupied condos. However, a higher down payment of 10% is necessary for second-home condos, while investment condos typically require a 20% down payment. It’s crucial for condo projects seeking financing to adhere to these guidelines to qualify for conventional loans through Fannie Mae or Freddie Mac.

Only condominium deemed warrantable, meeting the specific criteria outlined by the agencies, are eligible for warrantable condominium financing.

In the assessment process, a comprehensive condominium project questionnaire must be completed by the HOA Manager of the condo complex. This questionnaire serves as a detailed overview of the condominium project and its compliance with Fannie Mae and Freddie Mac Agency Guidelines. It covers various aspects, such as the financial health of the HOA, insurance coverage, litigation history, and occupancy rates.

Owner Occupancy Rules for Conventional Condos

One of the most common myths related to conventional condominium financing is that a project must have at least 51% owner occupancy.

That is not the case for 2026.
Fannie Mae officially eliminated its holding investment concentration for established projects in 2026.
Freddie Mac also updated its established project policies and eliminated the owner-occupancy requirement for investment properties under review.

New Condo Projects Are Different

New and newly converted condominiums have additional stipulations.
For a Fannie Mae Full Review of a newly established project, at least 50% of the project, or a legal phase under a contract, must be sold to principal-residence or second-home buyers.
Freddie Mac also maintains occupancy and presale requirements for applicable reviews of new condominium projects.
Buyers must distinguish between the rules for established condo projects and those for new developments.

Commercial Space in a Condominium Project

Some condominium projects with mixed-use components can secure conventional financing, though excessive commercial space may create some obstacles.
Under its applicable project standards, Fannie Mae generally limits commercial or mixed-use space to no more than 35 percent of the condominium project or building.
Commercial space requirements may vary somewhat depending on the size and type of the project under review by Freddie Mac, though the specific treatment may differ.
A condominium above retail stores or restaurants is not automatically considered non-warrantable.
The entire project must be evaluated.

One Owner Equals a Lot of Units: A Warning to Avoid Condo Projects

Lenders not only review the number of units held by a single owner but also the nature of that owner, whether it is an individual, investor, corporation, developer, etc. Several single owners may make a condominium project too concentrated; one large owner may control the project’s finances, voting, and rental control.

Fannie Mae’s limits may vary, depending on the size of the project. For example, its ineligible project rules set different single-entity ceilings for projects with 5–10 units, 11–20 units, and 21 or more units.

Freddie Mac, for its part, has its own single-entity owner rules, which are not always the same. Freddie Mac’s Condo Project Advisor states that concentration may be a project eligibility concern. Lenders should verify agency-specific rules rather than assume Fannie Mae and Freddie Mac are identical.

What Is a Condo Questionnaire?

A condo questionnaire is a form lenders use to gather information about the condo project. Some questionnaires contain sections on HOA finances, reserves, insurance, litigation, special assessments, the project, concentration of ownership, commercial spaces, and other issues of concern, but the questions on the form vary. Fannie Mae Condominium Project Questionnaire (Form 1076) presents a model questionnaire.

Submission of a similar questionnaire is acceptable to Fannie Mae, provided the lender obtains the information to evaluate the project’s eligibility.

The project information is typically collected by the HOA, the property management company, or another authorized party.

The questionnaire is not project approval; it simply provides information for the lender’s review.

Documents a Condo Buyer Should Review Early

Buyers should collect and review key HOA and project documents early in the condominium purchase process. These may include the current HOA budget, recent financial statements, HOA meeting minutes, information on pending litigation, special assessments, insurance information, reserve information, reserve studies, and recent engineering or structural reports.

Fannie Mae identifies budgets, financials, reserves, insurance, legal docs, reports, and condominium questionnaires among the project type documentation lenders may review. A reputable lender will review a condo as early as possible.

What Is Condotel Financing?

Condotel units represent a unique hybrid of condominium and hotel accommodations, providing the benefits of both residential ownership and hotel amenities. Within these hotel complexes, certain units are designated condotels, offering private ownership opportunities to individuals seeking a blend of investment and leisure.

Despite the allure of condotel ownership, securing financing for such units can often prove to be a formidable task, as many lenders tend to be hesitant due to the unconventional nature of condotel investments.

Gustan Cho Associates is an exceptional choice in this field, offering specialized financing options for condotels. At our company, we specialize in providing options that meet the unique needs of each potential homebuyer. By providing access to portfolio loans, Gustan Cho Associates facilitates the acquisition of condotel units, enabling individuals to capitalize on this unique investment opportunity.

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Condotel versus Warrantable Condominium Units

It’s important to note that condotel financing typically comes with specific requirements and conditions that borrowers must meet to qualify. According to Fannie Mae-Freddie Mac Condo Guidelines, condotel financing typically entails a minimum down payment requirement, with second-home condotel units necessitating a 25% down payment and investment condotel units requiring a higher 40% down payment. Lenders may require borrowers to maintain reserves equivalent to at least one year’s PITI to mitigate risk.

Beyond financial considerations, condotel units must also meet certain structural and legal criteria to comply with lending standards.

These criteria often include minimum square footage requirements, with condotel units typically needing to exceed a certain threshold, such as 500 square feet, to qualify for financing. Additionally, condotel units must feature at least one bedroom and a fully functional kitchen, mirroring the amenities expected of traditional residential units.

Mortgage Guidelines of Condominium Complex of Warrantable and Non-Warrantable Condos

Furthermore, lenders typically scrutinize the legal status of the condo complex in which the condotel unit is located, ensuring no pending litigations or disputes could jeopardize the investment’s stability. Compliance with these guidelines enhances the desirability of condotel units as investment opportunities.

The condominium complex mitigates risk for lenders, thereby facilitating smoother financing processes for prospective buyers.

In summary, while condotel ownership presents a unique investment opportunity blending residential and hotel accommodations, securing financing for such units can be complex. However, with specialized lenders like Gustan Cho Associates offering tailored condotel financing solutions and adherence to Fannie Mae-Freddie Mac Condo Guidelines, prospective buyers can navigate the process more confidently, unlocking the potential of condotel investments with greater ease and assurance.

Freddie Mac Condo Requirements

Gustan Cho Associates has cultivated partnerships with numerous non-QM wholesale lenders, facilitating access to financing for individuals seeking non-warrantable condos. Our team can assist you if you’re inquiring about non-QM or alternative mortgage loans. Feel free to contact Gustan Cho Associates at 800-900-8569, text us for expedited responses, or email us at alex@gustancho.com.

We prioritize accessibility and are committed to serving you seven days a week, including evenings, weekends, and holidays. Navigating the intricacies of condo financing can be daunting.

Gustan Cho Associates is here to streamline the process and provide tailored solutions. At Gustan Cho Associates, our team excels in guiding homebuyers with personalized support and comprehensive guidance throughout the loan acquisition journey. Whether exploring traditional options or seeking alternative financing, trust Gustan Cho Associates to deliver transparent, efficient, and reliable service at every step.

FAQs: Fannie Mae-Freddie Mac Condo Guidelines on Conventional Loans

1. What are the key points regarding Fannie Mae-Freddie Mac Condo Guidelines? The article discusses how these guidelines enable conventional condo loans with a low 3% down payment, emphasizing the growing popularity of condos and the risks involved in their purchase.
2. How do Fannie Mae and Freddie Mac’s guidelines affect condo financing? These guidelines set criteria for condos to qualify for conventional loans, covering borrower eligibility and condo project assessment. Non-warrantable condos may still secure financing through Gustan Cho Associates with a 20% down payment.
3. What’s the importance of the condo project questionnaire mentioned? The questionnaire ensures compliance with Fannie Mae-Freddie Mac condo guidelines, detailing the condo project’s financial health, insurance, litigation history, and occupancy rates, aiding mortgage underwriters’ review.
4. Can individuals secure financing for condotel units, and what are the requirements? Yes, through specialized lenders like Gustan Cho Associates. The guidelines specify down payment requirements (25% for second-home, 40% for investment condotels) and may require reserves equivalent to one year’s mortgage payments. Compliance with structural and legal criteria is vital for approval.

This blog about Fannie Mae-Freddie Mac Condo Guidelines On Conventional Loans was updated on March 4, 2024.

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