“But someone in the building just got a conventional loan last year.”

I’ve heard variations of that statement many times when financing a condominium.

A unit owner refinanced.

A neighbor purchased a condo with 20% down.

Fannie Mae or Freddie Mac financing was apparently available.

So when the next unit comes on the market, everyone assumes the condominium project should still qualify.

That assumption has become increasingly dangerous.

Fannie Mae and Freddie Mac have recently changed important condominium lending requirements. Limited/Streamlined Reviews have been eliminated for new applications, reserve studies are receiving greater attention, HOA financial requirements are changing, and another significant reserve requirement becomes mandatory in January 2027.

At the same time, California and San Francisco condominium associations face their own inspection, maintenance, reserve, and disclosure requirements.

The result?

A condominium that successfully obtained conventional financing yesterday may not necessarily qualify for the same financing today.

And a loan that closed in the building last year isn’t proof that another loan will close there next week.

First, What Does “Warrantable” Mean?

In mortgage lending, a “warrantable” condominium generally refers to a condominium project that satisfies the applicable eligibility requirements for financing that can be sold to Fannie Mae or Freddie Mac.

The lender isn’t simply evaluating the condominium unit.

It is evaluating the project.

Depending upon the applicable review, that can involve issues such as:

  • HOA financial condition and reserves
  • Master insurance coverage
  • Special assessments
  • Deferred maintenance
  • Critical repairs
  • Litigation
  • Delinquent HOA assessments
  • Commercial space
  • Ownership and project characteristics
  • Reserve studies
  • Structural and safety concerns
  • Project documentation

That’s why condo financing is different from financing a single-family home.

The borrower can qualify and the building can still create a problem.

What Changed in August 2026?

One of the most important recent changes is the elimination of Fannie Mae’s Limited Review and Freddie Mac’s Streamlined Review for new applications beginning August 3, 2026.

Those review methods previously provided an important financing path for certain established condominium transactions meeting specific requirements.

Now, projects generally need to qualify through an applicable Full Review or Waiver/Exempt From Review pathway.

That distinction matters.

A condominium that was successfully financed under a Limited or Streamlined Review in the past doesn’t automatically demonstrate that the same project will satisfy the review required for today’s transaction.

The rules changed.

Yesterday’s Closing Is Not Today’s Condo Approval

Imagine you’re listing a condominium in San Francisco.

You know Unit #4 sold nine months ago.

The buyer obtained a conventional mortgage.

Maybe another owner refinanced it two years ago.

Everyone assumes:

“We’re fine. The building has already been approved.”

Not necessarily.

Several things may have changed since those transactions:

  • Agency guidelines may have changed.
  • The applicable project-review method may have changed.
  • The HOA budget may have changed.
  • Insurance coverage or deductibles may have changed.
  • A new special assessment may have been imposed.
  • Litigation may have begun.
  • An inspection may have identified repairs.
  • The reserve study may have been updated.
  • HOA reserves may no longer satisfy the applicable requirement.
  • Deferred maintenance may have become a financing concern.

Most importantly, the prior transaction itself may have been reviewed differently.

That’s why I wouldn’t rely upon:

“Another lender financed a unit here before.”

I want to know:

Can we finance this unit under today’s guidelines?

The Disappearance of Limited Review Is Particularly Important

Limited Review was valuable because the lender wasn’t necessarily required to conduct the same level of project analysis required under a Full Review.

With that option eliminated, some condominium projects that previously had a relatively straightforward conventional financing path may now receive greater scrutiny.

That doesn’t mean those projects suddenly became non-warrantable.

Many will continue to qualify.

And an important counterbalance is that certain smaller condominium projects can now qualify for expanded Waiver/Exempt From Review treatment.

But other projects may encounter an HOA problem that didn’t prevent an earlier transaction from closing.

For San Francisco real estate, that distinction can be significant.

Small San Francisco Condo Buildings May Actually Get Some Help

Not every recent change makes condominium financing harder.

Fannie Mae and Freddie Mac expanded certain project-review flexibility beyond the previous 2-to-4-unit threshold to include qualifying projects with as many as 10 units, subject to the applicable requirements.

That’s potentially important in San Francisco.

We have a substantial number of smaller condominium buildings that don’t resemble the large condominium developments found in many other markets.

A three-unit Victorian.

A four-unit Edwardian.

A six-unit condominium building.

An eight-unit project.

These smaller projects are a familiar part of San Francisco housing.

So, while eliminating Limited/Streamlined Review tightens one avenue of financing, the expanded treatment for certain smaller projects may help offset the effect for some San Francisco properties.

This is why you can’t simply say the new guidelines are either “good” or “bad.”

The answer depends upon the project.

Then Comes January 2027

Another important change is approaching.

For applicable Full Reviews, the standard minimum replacement reserve allocation is scheduled to increase from:

10% of annual budgeted assessment income

to:

15% of annual budgeted assessment income

beginning January 4, 2027.

Consider an HOA collecting $600,000 annually in assessment income.

At 10%, the annual reserve allocation would be:

$60,000

At 15%, it becomes:

$90,000

That’s a 50% increase in the minimum allocation.

An HOA budget that satisfied the standard previously may therefore need to be evaluated differently under the new requirement.

There are provisions involving acceptable reserve studies, but those requirements have changed as well.

For San Francisco HOA boards, listing agents, and owners considering selling in 2027, this deserves attention before a property goes into escrow.

“But Our HOA Has Plenty of Money in the Bank”

That’s another statement that can cause confusion.

Having a large reserve balance doesn’t necessarily answer the mortgage lender’s question.

The lender may need to evaluate the association’s budgeted contribution to replacement reserves or determine whether an acceptable reserve study supports the HOA’s funding plan.

Those are different questions from simply:

“How much cash does the HOA have?”

A condominium association might have substantial reserves today but also face expensive upcoming repairs.

Conversely, an HOA may have a smaller reserve balance but a well-supported funding plan and acceptable reserve study.

The details matter.

San Francisco Adds Another Layer

San Francisco condominiums don’t exist in a vacuum.

California Civil Code §5551 requires qualifying condominium projects with three or more multifamily dwelling units to inspect specified exterior elevated elements, including certain balconies, decks, stairways, walkways, and railings supported substantially by wood or wood-based products.

Those inspections must evaluate safety, condition, expected performance, remaining useful life, and necessary repairs.

The inspection report is also incorporated into the association’s reserve study.

San Francisco has its own requirements as well.

Housing Section 604 applies to residential condominium buildings with three or more dwellings and addresses weather-exposed building components such as decks, balconies, landings, stairway systems, guardrails, handrails, and fire escapes.

Why does this matter to mortgage financing?

Because inspection requirements themselves aren’t the same thing as Fannie Mae or Freddie Mac lending guidelines.

But an inspection can uncover something that does matter to the lender:

Repairs.

Deferred maintenance.

Structural deterioration.

An unsafe condition.

A substantial upcoming expense.

A special assessment.

Insufficient reserves to complete necessary work.

That’s where building compliance and mortgage financing can collide.

A Six-Unit San Francisco Building Is a Good Example

Suppose you’re selling a condominium in a six-unit San Francisco building.

Someone purchased another unit in 2025 using conventional financing.

Does that mean your 2026 buyer should be fine?

No.

Perhaps the previous transaction qualified under a review method that is no longer available.

Perhaps the HOA subsequently completed an exterior-element inspection identifying repairs.

Perhaps the insurance policy changed at renewal.

Perhaps a special assessment was imposed.

Perhaps the latest reserve study revealed a significant funding requirement.

Or perhaps nothing problematic happened at all—and the project still qualifies easily.

The point is that the previous closing doesn’t answer the current financing question.

Today’s transaction needs to be evaluated under today’s facts and today’s guidelines.

What Should Listing Agents Do?

For a San Francisco listing agent, I would no longer be comfortable relying simply upon the fact that another unit recently obtained conventional financing.

Before or shortly after taking the listing, consider gathering:

  • Current HOA budget
  • Current reserve study
  • Master insurance policy
  • Current insurance deductible information
  • Recent HOA meeting minutes
  • Information concerning special assessments
  • Pending or active litigation
  • Delinquent assessment information
  • Structural or exterior-element inspection reports, when applicable
  • Information concerning significant repairs or deferred maintenance

Then ask the mortgage professional an important question:

“Do you see anything here that could create a financing problem for my buyer?”

Finding out before receiving offers is much better than finding out after the buyer’s lender begins its project review.

What Should Buyer’s Agents Do?

Don’t assume the words “conventional financing” in a preapproval letter mean every condominium your client visits will qualify.

The preapproval primarily tells you about the borrower.

Once your client becomes interested in a condominium, the project becomes part of the lending equation.

Ask whether the lender has identified any project-review concerns.

And be cautious about relying upon statements such as:

  • “Someone financed here last year.”
  • “The listing agent says the building is warrantable.”
  • “The HOA says there aren’t any problems.”
  • “Another bank said the project was approved.”
  • “The buyer is putting 25% down, so we’re fine.”

Those statements may be useful information.

They aren’t substitutes for the project review applicable to the current transaction.

What Should Condo Owners and HOA Boards Do?

If you’re planning to sell in the next year, it may be worth understanding your HOA’s financing position before your unit hits the market.

And HOA boards should recognize that decisions involving reserves, insurance, maintenance, and assessments can affect more than the association’s monthly budget.

They can potentially affect the marketability of every unit in the building.

An HOA that makes conventional financing difficult may unintentionally reduce the pool of potential buyers available to its owners.

What Happens If the Condo Isn’t Warrantable?

This is where another misconception needs to be addressed.

Non-warrantable doesn’t necessarily mean unfinanceable.

Fannie Mae and Freddie Mac are not the entire mortgage market.

Depending upon the reason the project doesn’t qualify, there may be:

  • Portfolio lenders
  • Jumbo lenders
  • Non-QM lenders
  • Alternative condominium programs
  • Other financing strategies

These alternatives may have different down-payment, credit, reserve, interest-rate, and underwriting requirements.

And not every project problem can be overcome, but almost all can be financed with some type of loan.

But before telling a buyer or seller that a condominium “can’t be financed,” I would want to know exactly why the conventional loan didn’t work.

Sometimes the answer isn’t to abandon the transaction.

It’s to find a loan broker (like me) who has access to the lenders whose guidelines fit the property.

BROKER’S EDGE TIP

Don’t ask only whether a condominium was warrantable last year. Ask whether it’s warrantable today.

Prior conventional closing is useful information, but it isn’t a guarantee.

Guidelines change.

HOA budgets change.

Insurance changes.

Reserve studies change.

Buildings age.

Repairs are discovered.

Special assessments happen.

And lenders can have different overlays even when they are working from the same underlying Fannie Mae or Freddie Mac requirements.

Evaluate the current project using the current guidelines.

Who Is This Most Important For?

This is particularly important for:

  • San Francisco condominium buyers
  • Condo owners preparing to sell
  • Listing agents
  • Buyer’s agents
  • HOA board members
  • Property managers
  • Real estate investors
  • Owners considering refinancing

The earlier a potential financing issue is identified, the more time everyone has to determine whether it can be resolved—or whether another financing strategy should be considered.

Common Misconception

“Fannie Mae financed another unit in our building last year, so we’re Fannie Mae approved.”

Not necessarily.

The prior loan may have involved different project-review requirements, different HOA circumstances, different lender overlays, or guidelines that have since changed.

A previous successful closing is encouraging.

It is not guaranteed about the next one.

The Bottom Line

San Francisco condominium financing is changing.

The elimination of Limited/Streamlined Review, increased attention to project finances and reserve studies, evolving insurance requirements, California inspection requirements, San Francisco building requirements, and the upcoming 15% reserve standard make early project review increasingly important.

The question isn’t:

“Has anyone ever financed a unit in this building?”

The better question is:

“Can we finance this condominium today?”

And if the answer under conventional guidelines is no, the next question should be:

“Why not—and what other financing options do we have?”

Need Help Evaluating a San Francisco Condominium?

I’ve developed a Condo Warrantability Checklist and an HOA Red Flag Guide to help buyers, Realtors, condominium owners, and other real estate professionals identify potential financing concerns earlier.

If you’re considering buying, selling, or refinancing a condominium, contact me and I can provide the appropriate resource and help evaluate the financing considerations surrounding the property.

Yesterday’s approved condo wasn’t necessarily today’s approved condo.

And today’s non-warrantable condo isn’t necessarily tomorrow’s dead transaction.

Sometimes you just need to know where—and what—to look for.

Every borrower is unique. Every property has a story.
If you’re navigating a real estate challenge — big or small — I’m here to help you find the smartest path forward.

🔎 BROKER’S EDGE – Smarter Real Estate Lending
🤝 Looking out for your Best Interest, and Helping Homeowners, Investors & Small Business Owners since 1990

📞 Steven Hook | Residential & Commercial Mortgage Broker

📱 415-260-9376 | 📠 415-449-3428

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🌐 shook@Uamco.com or smhloans007@gmail.com

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Mortgage and condominium project guidelines change frequently. This article is intended for educational purposes and reflects guidelines available at the time of publication. Condominium eligibility depends upon the specific project, transaction, review method, lender requirements, and applicable agency guidelines. Individual lender overlays may vary.

Posted in Condominiums, First Time Real Estate Buyers, Residential Real Estate Loans, Uncategorized