August 2nd, 2026 3:45 PM by Sam Kader NMLS# 130505
If you are buying, selling, or refinancing a condominium, I want you to be aware of an important change affecting conventional condo financing in 2026. Fannie Mae and Freddie Mac have updated their condominium project review requirements, and several of those changes become especially important for loan applications dated August 3, 2026 or later.
One of the biggest changes is the retirement of Fannie Mae's Limited Review and Freddie Mac's Streamlined Review options for applicable new applications. As a result, many condominium projects may require a more comprehensive project review before conventional financing can be approved.
However, there is an important exception for certain smaller condominium projects with 10 or fewer units. That exception may be particularly relevant in the Seattle-area market, where smaller neighborhood condo developments are common.
One of the most important parts of the 2026 update is expanded project-review relief for certain smaller condominium developments.
Fannie Mae expanded its Waiver of Project Review eligibility to include qualifying new and established condominium projects containing 10 or fewer units. Freddie Mac likewise provides an Exempt From Review pathway for certain smaller condominium projects that meet its applicable requirements.
Very small condominium projects may have access to project-review exceptions under applicable Fannie Mae or Freddie Mac guidelines. The exact eligibility depends on the transaction, project characteristics, property type, and the agency requirements in effect when the loan is underwritten.
This means I would not automatically assume that a two-, three-, or four-unit condominium requires the same project review as a much larger development. I would first determine which project-review pathway applies to the specific loan.
For projects containing 5 to 10 attached units, the project structure becomes especially important.
Under Fannie Mae's expanded Waiver of Project Review, a 5-to-10-unit project generally must not be part of a master association or larger development to qualify under the expanded small-project waiver. Other applicable eligibility requirements also continue to apply.
Freddie Mac similarly allows certain 5-to-10-unit condominium projects that are not part of a master association to qualify under its Exempt From Review provisions, subject to applicable requirements.
The important point is that “10 units or fewer” does not automatically mean “no project review.” The lender still has to determine whether the project and mortgage qualify for the applicable exception.
This is an important distinction that buyers, sellers, and real estate agents should understand.
For Fannie Mae, an attached 5-to-10-unit condo project that is part of a master association generally does not qualify under the expanded small-project Waiver of Project Review. For applicable loan applications dated August 3, 2026 or later, the project may instead need to satisfy Full Review requirements unless another transaction-specific exception applies.
Freddie Mac also places additional limitations on attached 5-to-10-unit projects that are part of a master association. Certain Freddie Mac-owned no-cash-out refinances or other eligible transactions may have separate treatment, but eligibility should be evaluated on a case-by-case basis.
A project-review waiver does not mean that every condominium requirement disappears. It means the loan may not have to undergo the same comprehensive project review that would otherwise apply.
For example, under Fannie Mae's requirements, an eligible project using the Waiver of Project Review generally must not have an Unavailable status in Condo Project Manager, and applicable property and flood insurance requirements must still be satisfied. Other requirements may apply depending on the loan and project.
Freddie Mac also maintains general project eligibility requirements for mortgages delivered under Exempt From Review. Certain project types, property conditions, or transaction characteristics can still affect eligibility.
For projects that do not qualify for an applicable waiver or exemption, the lender may need to perform a more comprehensive review of the condominium project.
According to the CondoTek presentation on the 2026 agency guideline changes, approximately 65% of condo loans had been processed using Limited or Streamlined Review. The presentation explains that the move toward Full Review can result in greater scrutiny of the condominium association's operating budget, reserve funding, financial stability, special assessments, critical repairs, deferred maintenance, and other project documentation.
When I help someone finance a condominium, I look at two separate parts of the transaction: the borrower and the condo project.
A buyer may have strong credit, sufficient income, adequate assets, and otherwise meet the mortgage program's underwriting requirements, but financing may still be affected if the condominium project does not satisfy applicable agency or lender guidelines.
Potential project concerns may include inadequate master insurance, significant deferred maintenance or critical repairs, certain special assessments, project litigation, or other characteristics that affect project eligibility. Fannie Mae notes that insufficient master property insurance and critical repair issues are among the common reasons projects may be identified as ineligible.
I believe one of the best ways to reduce surprises in a condo transaction is to identify potential project eligibility issues as early as reasonably possible.
For a smaller project, I would first determine the total number of units, whether the units are attached or detached, and whether the project is part of a master association or larger development. Those details can affect whether a Waiver of Project Review, Exempt From Review, or another review type may be available.
For larger projects or projects that do not qualify for an exception, I would want the relevant association documentation reviewed as early as practical so potential financing concerns can be identified before the transaction is close to closing.
These changes also matter to condominium sellers and listing agents because the condition and documentation of the condominium association may affect a prospective buyer's financing options.
Current association budgets, insurance information, reserve documentation, special assessment information, and documentation concerning major repairs may become important during the lender's review.
I encourage buyers and real estate professionals to avoid assuming that a condo is automatically financeable simply because other units in the project have previously obtained mortgages. Project requirements, property conditions, agency rules, lender overlays, and documentation can change over time.
The 2026 CondoTek presentation also discusses changes involving condominium association replacement reserves. It states that the applicable budgeted reserve allocation is scheduled to increase from 10% to 15%, effective January 4, 2027, subject to the applicable agency requirements in effect at that time.
Reserve studies may provide an alternative way to demonstrate adequate replacement reserve funding under applicable agency guidelines. Where a qualifying reserve study is relied upon, agency requirements concerning the funding methodology and recommended reserve contribution must be satisfied. Freddie Mac, for example, states that baseline funding may not be used for this purpose for applicable mortgages and that the highest recommendation in the reserve study must be used.
The Seattle-area condominium market includes everything from large high-rise developments to small two-, four-, six-, and eight-unit neighborhood projects. Because of that variety, I do not believe every condo transaction should be approached the same way.
If you are considering a condo with 10 or fewer units, one of the first questions I would examine is whether the project and mortgage may qualify for a Fannie Mae Waiver of Project Review or Freddie Mac Exempt From Review pathway.
For a 5-to-10-unit project, I would also determine whether it is part of a master association because that detail may materially change the project-review requirements.
If the project does not qualify for an exception, I would then evaluate which project-review requirements apply based on the specific loan program and transaction.
The 2026 condominium lending changes make early project review increasingly important, but they do not mean that every condominium must undergo the same review process.
Eligible projects with 10 or fewer units may have important project-review exceptions available. However, eligibility depends on the project's structure, the specific mortgage transaction, current Fannie Mae or Freddie Mac requirements, and any applicable lender underwriting requirements.
My approach is to evaluate both sides of the transaction early: Can the borrower qualify, and can the condominium project meet the applicable financing requirements?
If you are considering buying or refinancing a condominium in the Seattle area, I can help you review the mortgage requirements and identify which condo project review process may apply to your transaction.
Contact me for a personalized discussion based on your property, loan program, and individual circumstances. Eligibility and financing options depend on the borrower, property, condominium project, loan program, lender guidelines, and underwriting approval.