Can a Qualified Buyer Still Lose Condo Financing Because of the Project?
By Louay Yousif | Mortgage Advisor
Updated November 1, 2026
Yes. A buyer can have the income, credit and down payment to qualify, yet still run into a delay or denial if the condo project does not meet the loan program’s rules.
The lender looks at more than your qualifications. It also reviews the unit and the project. For a Fannie Mae loan, a good appraisal does not replace the project review. Fannie Mae project standards
Before you get too far, ask: “Has this exact unit and project been reviewed for the loan I plan to use?” A preapproval helps you shop, but it is not a guaranteed loan offer. CFPB preapproval guidance
Four areas that deserve an early look
Association finances
Look beyond the monthly HOA dues. The budget, reserve study and financial statements help show whether the association can maintain shared property and pay for expected work. Low dues may feel attractive until a major expense arrives. Ask what work is coming and how it will be funded. Fannie Mae Full Review guidance
Repairs and special assessments
Ask what an assessment pays for and whether the work is complete. Under Fannie Mae’s rules, unresolved critical repairs can make a project ineligible. Approving an assessment to fund them does not finish the repairs. Routine maintenance and critical safety or structural problems receive different treatment. Fannie Mae ineligible-project rules
Insurance coverage
Have the lender review the association’s master policy, coverage and deductibles, along with any required unit-owner policy. Current Fannie Mae rules can require individual coverage because the master policy has a per-unit deductible, even when it covers unit interiors. A project-review waiver does not erase applicable insurance requirements. Fannie Mae master-insurance requirements
Litigation
The nature of a lawsuit matters. Fannie Mae permits certain minor legal matters under specified conditions; other litigation can affect eligibility. Get the actual details reviewed rather than relying on “the HOA says it is fine.” Fannie Mae litigation guidance
What changed in project review
Fannie Mae no longer offers Limited Review for loan applications dated August 3, 2026 or later. An established project that once used that path now needs Full Review or, when eligible, a Waiver of Project Review. Fannie Mae 2026 changes
Freddie Mac also ended Streamlined Review for mortgages with Application Received Dates of August 3, 2026 or later. The lender must use another permitted review or confirm that the project qualifies for an exemption. Switching to Freddie Mac does not bring back the retired shortcut. Freddie Mac Bulletin 2026-C
A larger down payment does not replace the required project review. Some smaller projects may qualify for a waiver or exemption, but size alone does not decide it. The lender has to match your transaction to the correct review path. Fannie Mae waiver requirements | Freddie Mac project-review guidance
What changes with reserves in January 2027
For applications covered by the January 4, 2027 change, the standard annual reserve allocation rises from 10% to 15% of budgeted assessment income for Fannie Mae Full Review and Freddie Mac Established and New Condominium Project reviews. Fannie Mae uses the loan application date; Freddie Mac uses the Application Received Date. The closing date is not the cutoff. Fannie Mae announced reserve change | Freddie Mac announced reserve change
This is about how the HOA allocates money in its annual budget. It is not a requirement to hold 15% of the property’s value in cash, and it does not automatically require a 15% dues increase. The calculation also allows permitted exclusions.
Qualifying reserve studies may provide another route. Under the requirements effective August 3, 2026, the budget must follow the study’s highest recommended annual allocation; a baseline approach that lets reserves get close to zero cannot be used for this alternative. See the official Fannie Mae reserve guidance and Freddie Mac reserve guidance for details and other permitted alternatives.
The coming change is a reason to review the budget, not a reason to rush a purchase or assume the project will fail.
What this can mean for current owners
These lending changes do not automatically require an HOA to raise dues. But if an association increases dues to strengthen reserves or fund planned work, current owners can feel the effect in several ways:
Higher monthly dues affect the household budget and can affect a buyer’s mortgage qualification because lenders generally count HOA dues in the monthly housing expense.
Higher dues, unresolved repairs or reserve concerns can affect resale marketability and refinance options if the project does not meet a selected loan program’s requirements.
Special assessments can still be possible when major repairs, insurance costs or other expenses exceed available funds, even after regular dues increase.
Hypothetical example: A $50 monthly dues increase adds $600 per year. If $300 monthly dues increased by 5% each year, they would become $315 in year one and $330.75 in year two. This is only an illustration—not a forecast, a required increase or a statement that any association must raise dues.
Current owners can ask for the latest budget, reserve study, assessment notices and planned capital-work schedule to understand what is proposed and why.
A California item to check
Buying a condo in California? Ask whether SB 326 applies to the project and, if so, whether the required exterior elevated-element inspections are complete. Request the report and documentation of recommended repairs, not just reassurance that the building “passed.” Findings can matter to safety, reserve planning and project review. An inspection requirement does not itself mean a special assessment is necessary. Ask what the report found, what remains unresolved and how repairs will be funded. California Department of Real Estate guidance
How a project issue can stall a purchase
Hypothetical example: A buyer is preapproved, and the unit appraises at the contract price. Project review then reveals unfinished structural balcony repairs. The HOA has approved an assessment, but the work is not complete.
For a transaction subject to Fannie Mae’s critical-repair restrictions, that project condition can stop financing even though the buyer’s qualifications have not changed. The lender needs evidence that resolves the repair issue. Increasing the down payment will not repair the building. Fannie Mae critical-repair guidance
An early review gives you more time to evaluate your options.
Put the review on your purchase timeline
Connect your agent and lender with the association or management contact early. A useful starting list includes:
The current budget, financial statements and reserve study.
Master insurance information and any required unit coverage.
Special-assessment notices and planned-work information.
Building inspection reports and repair-completion records.
Details of litigation or other major unresolved issues.
The lender’s questionnaire or equivalent supporting documents.
Ask whether the lender is missing a document, waiting for a condition to be resolved or finding the project ineligible for the proposed loan. Those call for different next steps. A previous sale in the building is not approval of today’s transaction.
Coordinate financing and document-review deadlines with your agent. Get legal advice when needed before removing contractual protections. Fannie Mae condo-buyer guidance
Do FHA and VA use the same rules?
No. FHA may allow financing through an approved condominium project or an eligible Single-Unit Approval within a project that is not FHA-approved. HUD condominium guidance
VA purchase financing requires a condo in a VA-approved project. Check the applicable program early; borrower eligibility and project eligibility are separate questions. VA purchase-loan guidance
Looking at a condo?
Send me the address early. I’ll help identify the project review and documents needed for the financing you’re considering, so you know what needs to be checked before you commit.
Louay Yousif | Mortgage Advisor | NMLS #1515287
Paramount Residential Mortgage Group, Inc. | NMLS #75243
619-954-3446 | [email protected] | louayyousif.com
1265 Corona Pointe Court, Suite 301, Corona, CA 92879
Equal Housing Opportunity | NMLS Consumer Access
Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act.
Educational information as of November 1, 2026. This is practical buyer guidance, not a complete underwriting checklist. Fannie Mae and Freddie Mac examples do not cover every loan program. Requirements depend on the project, transaction and lender and may change. This article is not project approval, a commitment to lend or legal advice. All loans are subject to underwriting and approval.
