Condo mortgage requirements in 2027: warrantable vs non-warrantable, HOA rules, and Fannie Mae guidelines

A warrantable condo meets Fannie Mae and Freddie Mac's project approval standards, making it eligible for conventional financing. Key requirements: (1) at least 51% of units are owner-occupied (not investor-owned); (2) no single entity owns more than 10% of the units; (3) no pending special assessments or unresolved structural issues; (4) HOA is financially sound (adequate reserves, no major delinquencies); (5) commercial space does not exceed 35% of building square footage; (6) no active litigation involving the HOA; (7) project is complete (not under construction). The full criteria are in Fannie Mae's condo project review guidelines (B4-2.2-01).

A non-warrantable condo is one that does not meet Fannie/Freddie standards — it cannot be securitized, so conventional lenders won't originate a standard mortgage on it. Common non-warrantable issues: investor concentration above 50%, pending litigation, active hotel/rental program, inadequate reserves, or a newly constructed project without sufficient resale history. Financing options: (1) portfolio loans from local banks (they hold the loan — no selling requirement, so warrantability doesn't matter); (2) non-QM lenders at higher rates; (3) FHA loans (have their own condo approval process, separate from Fannie/Freddie). HUD's FHA approved condo project list.

Following the 2021 Surfside collapse in Florida and growing scrutiny of aging high-rise buildings, Fannie Mae tightened condo project requirements in 2022 and again in 2023–2024. New rules require lenders to obtain a Condo Project Manager (CPM) questionnaire from the HOA including: any deferred maintenance, outstanding special assessments, structural review results, and insurance adequacy. Projects with significant deferred maintenance or unresolved structural concerns are flagged as ineligible. Many Florida, Hawaii, and coastal high-rise buildings have been removed from Fannie/Freddie eligibility since 2022 — buyers in those markets face significantly reduced conventional financing options. The FHFA condo safety guidance covers the policy rationale.

Fannie Mae requires the HOA to: (1) maintain reserves equal to at least 10% of the annual budget (many lenders overlay this to 15–20%); (2) have no more than 15% of units 60+ days delinquent on HOA dues; (3) carry adequate insurance (hazard, liability, fidelity/crime bond if >20 units, flood if in SFHA); (4) not have deferred maintenance that affects safety or structural integrity; (5) not be in litigation that could materially affect the project's financial status. Lenders verify these via the HOA questionnaire. A building with 20% delinquent HOA dues or inadequate reserves will fail conventional review regardless of the individual unit's condition. See the HOA fee glossary for how these costs affect mortgage qualification.

Sometimes — but the condo project must be on FHA's approved condo project list or qualify under the Single Unit Approval (SUA) process. SUA allows FHA financing for individual units in projects not on the approved list, provided: the project is at least 50% owner-occupied, no more than 10% of units are owned by one entity, adequate insurance exists, and the project has been complete for at least 1 year. SUA is handled by the lender and does not require the whole project to be FHA-approved. Not all FHA lenders process SUA — ask specifically. FHA condo rules are in HUD Mortgagee Letter 2019-06.

A spot approval (now replaced by Single Unit Approval for FHA) was a process that allowed a lender to approve a single condo unit for financing without full project approval. Fannie Mae eliminated spot approvals in 2009 — now all conventional condo loans require either full project approval or limited review. FHA reintroduced its version in 2019 as Single Unit Approval (SUA). For conventional loans without full project review, a "limited review" option is available for: primary residences with 25%+ down payment, second homes with 10%+ down. Limited review skips the full HOA questionnaire but requires basic warrantability criteria. Details in Fannie Mae B4-2.2-01.