A condo lender reviews the building and its homeowners association as well as you. This post lists what that project review checks, so you can ask the HOA the same questions before you write an offer on a unit.
Building risks the lender reviews
A condo owner owns the unit and shares the common areas and building systems with the other owners. That shared ownership adds four risks a single-family home does not have:
- The HOA's finances affect your unit's value
- An underfunded or poorly managed HOA can levy special assessments on every owner
- A high rental share can affect FHA eligibility and your own ability to rent later
- Pending litigation against the HOA can block financing for buyers in the building
Warrantable and non-warrantable condos
A "warrantable" condo meets the guidelines set by Fannie Mae and Freddie Mac — the government-sponsored enterprises that buy conforming conventional mortgages. A non-warrantable condo does not meet those guidelines.
Warrantable condo requirements
A condo is warrantable if it meets these Fannie Mae and Freddie Mac tests:
- Owner-occupancy: No longer an agency test for established buildings (Fannie Mae LL-2026-03), though FHA still requires 50%
- Single-entity ownership: No single entity owns more than two units in a 5–20-unit building, or more than 20% of units at 21+ (Freddie Mac allows 25%)
- Commercial space: No more than 35% of the building's total floor area is commercial
- HOA budget: At least 10% of the annual budget goes to reserves (15% from January 2027)
- Insurance: The HOA carries adequate hazard, liability, and flood insurance
- No litigation: No active or pending litigation against the HOA (with limited exceptions)
- Delinquencies: No more than 15% of units are 60+ days delinquent on HOA dues
- New projects: Must meet presale requirements — at least 50% of units sold or under contract to owner-occupants
Financing a non-warrantable condo
A loan on a non-warrantable condo works like this:
- Portfolio lenders that keep the loan on their books rather than selling to Fannie/Freddie
- A higher rate and larger down payment than a warrantable unit — terms vary by lender
- Fewer lenders, because a lender that sells its loans to Fannie Mae or Freddie Mac cannot make a non-warrantable loan
What a condo project review covers
When you apply for a condo mortgage, the lender conducts a "project review" of the building. The review covers:
HOA finances
- Annual budget and reserve fund balance
- History of special assessments
- Percentage of owners current on dues
- Insurance coverage adequacy
Building ownership and use
- Owner-occupancy vs. rental ratio
- Concentration of ownership
- Commercial space percentage
- Age and condition of major systems
Legal documents and litigation
- Active or pending litigation
- Any regulatory violations
- CC&Rs (covenants, conditions, and restrictions)
- Right of first refusal clauses
Condo project review by loan type
Conventional loans
Conventional lenders run a Full Review on buildings of more than ten units unless the loan qualifies for a Limited Review; buildings of ten or fewer are review-waived, provided a 5–10-unit building is not part of a larger development or master association (Fannie Mae LL-2026-03).
FHA loans
FHA has its own condo approval process. The entire building must be on the FHA-approved condo list, or qualify for single-unit approval. FHA requirements include:
- Owner-occupancy of at least 50%
- No more than 50% FHA-insured units in the project
- HOA must be adequately funded
- No active litigation
You can check FHA-approved condos at HUD's Condominium lookup.
VA loans
VA keeps its own approved condo list. A building must be on it before a VA loan can finance a unit. VA's review covers factors similar to FHA's under VA's own criteria.
Steps for condo buyers before you offer
- Check approval status early: Before making an offer, verify whether the building is on FHA and VA approved lists and whether it meets warrantability guidelines
- Request the HOA resale package: The package contains the financials, budget, CC&Rs, and other documents your lender will need
- Ask about pending special assessments: A large upcoming assessment adds to your monthly or upfront cost and can hold up loan approval
- Read the rental cap: Some buildings limit the percentage of units that can be rented; the cap affects FHA eligibility and whether you can rent the unit later
- Factor in HOA dues: Your lender includes monthly HOA dues in your debt-to-income calculation, which lowers the loan amount you qualify for compared with a house that has no HOA
Get pre-qualified or book a 15-minute call to check a specific building.
