Fannie Mae's 2026 condo rule changes: what buyers and HOAs need to know

If you're buying a condo in the next 18 months, the rules are shifting under your feet. Fannie Mae published Lender Letter LL-2026-03 in March, and it rewrites a good chunk of how condo projects get evaluated and how they have to be insured. Freddie Mac is moving in the same direction, with FHFA coordinating.

Some of this is genuinely good news. Some of it is going to make certain buildings harder to finance. Here's the honest breakdown.

The short version

What changed	Before	After
Limited Review	Available for eligible established projects	Retired; Full Review or waiver instead
Waiver of Project Review	Narrower eligibility	Expanded to projects with 10 or fewer units
Investor concentration	50% cap on established projects	Cap removed
Florida PERS review	Required for new attached projects	Retired; lenders review in-house
HOA replacement reserves	10% of budgeted assessment income	15%, starting January 2027
Master policy roofs	Replacement cost required	Must be insured, but not at replacement cost
Master policy deductible	Less clearly defined	Up to $50,000 per unit

Limited Review is going away, and that's the big one

Limited Review was the fast lane. For established projects with enough owner-occupancy and a decent-looking budget, a lender could skip most of the project-level document collection and move on. That option is retiring.

Established projects that used to qualify now have to go through a Full Review, which means the HOA's budget, reserve funding, insurance certificates, and litigation status all get examined. More documents, more back-and-forth with the association, and sometimes a longer timeline.

The deadline that matters: lenders can drop Limited Review right now if they want, but they must stop using it for loan applications dated on or after August 3, 2026. Until then it's still on the table. (Worth noting for Florida buyers: the state-specific geographic restrictions ride along with Limited Review and disappear when it does.)

If you're under contract on a condo in an older or larger building, ask your loan officer early which review path they're using. The answer changes what the HOA needs to hand over.

Small buildings just got easier

The Waiver of Project Review now covers new and established projects with 10 or fewer units. No project review at all, assuming the project clears a few conditions: it can't be flagged "Unavailable" in Condo Project Manager, it has to meet the insurance requirements, and there can't be critical repairs or evacuation orders outstanding on certain refinances.

One catch that's easy to misread: for projects in the five to ten unit range, the building can't be part of a master association or a larger development. A ten-unit building standing on its own qualifies. A ten-unit phase inside a 200-unit community does not.

For small brownstone conversions and boutique buildings, this is a real improvement. Those projects used to fail reviews for reasons that had nothing to do with the property itself.

Investor caps are gone, and so is Florida's PERS bottleneck

The 50% investment property concentration limit for established projects reviewed under Full Review has been retired. A building that's half rentals is no longer disqualified on that basis alone. The presale requirement for new and newly converted projects still applies, so this isn't a blanket loosening.

Separately, new and newly converted projects with attached units in Florida no longer have to go to Fannie Mae's Project Eligibility Review Service. Lenders handle those under the delegated Full Review process like everywhere else. Anyone who waited out a PERS submission knows what that used to cost in calendar time.

Both changes are effective now.

Reserves: the requirement that will bite

Here's the part HOA boards should read twice.

Starting with loan applications dated on or after January 4, 2027, condo associations need to allocate at least 15% of their annual budgeted assessment income to replacement reserves. The old floor was 10%.

That's a 50% increase in required reserve funding, and it's not a paperwork change. For a building already running a tight budget, getting there means raising dues, cutting operating expenses, or watching the project fall out of eligibility for buyers using conventional financing.

There's a reserve study path, but it's stricter than it sounds. If a lender relies on a professional reserve study instead of the 15% rule, the association's budget has to include the highest recommended reserve allocation in that study. And the baseline funding method is off the table entirely. That's the approach that lets the reserve cash balance approach zero without going negative, and Fannie Mae will no longer accept it. The reserve study changes take effect earlier, for applications dated on or after August 3, 2026.

If you sit on a board, this is a 2026 budget conversation, not a 2027 one.

Insurance: mostly relief

Premiums have climbed hard in coastal and high-risk markets, and several of these updates are a direct response.

Roofs. Master policies no longer have to cover roofs on a replacement cost basis. Actual cash value, which accounts for depreciation, is acceptable. Read that carefully though: roofs still have to be insured. What changed is the valuation method, not whether coverage exists. An aging roof paid out at depreciated value can still leave an association with a gap, so this is flexibility with a tradeoff attached.

Coverage amount. Master policies still need to equal at least 100% of the estimated replacement cost value of the project improvements, including common elements and residential structures. What's easier is proving it. Lenders can now rely on guaranteed or extended replacement cost coverage, an insurer's estimate, the project's insurance risk appraisal, or a statement from a qualified professional. The separate inflation guard requirement has been retired.

Deductibles. Master policies can carry a per-unit deductible of up to $50,000. That's a meaningful number for a unit owner.

What the deductible change means for your HO-6

This is the piece that lands directly on buyers.

If the master policy has a per-unit deductible, you're required to carry an individual unit owners policy (an HO-6). Your coverage has to be at least the greater of two things: enough to restore the unit interior and any improvements the master policy doesn't cover, or the full amount of that per-unit deductible.

So if your building's master policy carries a $50,000 per-unit deductible, your HO-6 needs to cover at least $50,000. Your own policy's deductible is capped at the greater of 5% of the coverage amount or $2,500.

Most of the master and individual insurance updates are effective now, but lenders must comply for all loans with application dates on or after July 1, 2026.

Talk to an insurance agent before you close, not after. A cheap HO-6 quote that ignores the master policy deductible isn't going to satisfy the requirement, and finding that out during underwriting is a bad week.

Dates to keep

• Now: waiver expansion, investor cap removal, Florida PERS retirement, and most insurance updates are live
• July 1, 2026: mandatory compliance for master and individual property insurance changes
• August 3, 2026: Limited Review retired; enhanced reserve study rules required
• January 4, 2027: 15% replacement reserve minimum applies

Where this leaves condo buyers

Small buildings and investor-heavy projects get a clear win. Florida buyers save weeks. Associations struggling with insurance costs get some breathing room on roofs and documentation.

But the reserve increase and the loss of Limited Review push in the other direction. Buildings with thin reserves are going to have a harder time supporting conventional financing, and that pressure will show up in what buyers can get financed and what sellers can sell.

If a project doesn't meet these standards, that isn't automatically the end of the deal. Non-warrantable condo financing exists for buildings that fall outside agency guidelines, and it's a path we work with regularly.

We're a broker, so we're not the ones setting these rules or making the credit decision. What we can do is look at the specific building you're interested in, figure out which review path applies and which deadline you're up against, and connect you with lenders whose condo guidelines actually fit the project. If you're weighing a condo purchase in the next year, the timing of your application matters more than usual right now.

Start a conversation with our team and we'll take a look at the building before you're under contract.