Five Condo Loan Rules That Just Changed

Five Condo Loan Rules That Just Changed

If you tried to buy or refinance a condo over the last few years and the loan got blocked over something the building did — investor concentration, master insurance language, the project itself — there's a real chance the rule that blocked you isn't a rule anymore.

In March 2026, Fannie Mae and Freddie Mac quietly loosened five condo guidelines. The bulletin came through lender channels on March 27 and took effect immediately. It didn't make headlines because condo project review rules rarely do. But the changes are meaningful for the people they affect, and the people they affect are concentrated in markets we work in every day: Boulder, downtown Denver, the California coast, and the investment-heavy condo complexes in Texas metros.

Here's what changed, and what it means if you've been told a condo loan won't work.

1. The Project Waiver Now Covers Buildings Up to 10 Units

Until March, the streamlined Project Waiver path was capped at 2-4 unit condo projects. Anything larger had to go through a full project review — board questionnaires, reserve studies, budget review, the whole queue. Plenty of small Front Range and coastal condo conversions sat in that 5-10 unit zone and got stuck.

The waiver now extends to 10-unit projects. There are still conditions: the project has to be available in Fannie's Condo Project Manager (CPM), the insurance has to meet guidelines, and a Fannie-to-Fannie refinance has to verify there are no critical repairs or evacuation orders. A 5-10 unit building also can't be part of a larger project — it has to stand alone.

What it means in Boulder, downtown Denver, and Portland: A lot of older condo conversions on the Front Range fall into the 5-10 unit range. Walk-up brownstones in CapHill, conversions in downtown Denver, smaller buildings in University Hill and downtown Boulder. Portland has the same pattern — Pearl District and inner-east conversions in that same 5-10 unit zone. Buyers in those buildings used to need a lender willing to do a full project review on a small project that didn't have the documentation to support it. Now the waiver path opens.

2. The 50% Investor Concentration Cap Is Off for Established Projects

If you were trying to finance a condo as an investment property in a building where more than half the units were already non-owner-occupied, the file used to die at project review. The 50% investor concentration limit was a hard ceiling for investor loans on established projects.

That ceiling is now removed for established projects. Presale requirements still apply to new or newly converted buildings, and other project review items still apply — but the investor-percentage hard stop is gone.

What it means in Texas and resort markets: Texas metros — Austin downtown, Houston Midtown, the Dallas Uptown corridor — have condo complexes that lean heavily investment. Same with California coastal markets where short-term rentals push owner-occupancy down. Investors who wanted to buy in those buildings on a conventional loan used to be locked out by the concentration cap. That door now opens.

3. Master Insurance: Inflation Guard and Replacement-Cost Roof Coverage Aren't Required Anymore

Master insurance review used to be one of the most common reasons a condo loan got kicked back. Two specific requirements caused most of the trouble: an Inflation Guard endorsement, and replacement-cost coverage on the roof.

Both are gone as hard requirements. Roofs may now be covered on an Actual Cash Value (ACV) basis. Inflation Guard is no longer required. The master policy still has to equal 100% of the estimated replacement cost of the property, but the documentation paths to demonstrate that are flexible: a guaranteed replacement cost endorsement, an extended replacement cost endorsement, the insurer's estimate, a risk appraisal, or a professional statement.

What it means in California coastal markets: California coastal HOAs have had a hard time keeping master insurance compliant with the old standards. Replacement-cost roof coverage in particular has gotten difficult and expensive to maintain in some California zones. The new flexibility means buildings that couldn't keep replacement-cost roof coverage in place can still produce a Fannie-eligible loan as long as the overall coverage meets 100% of replacement cost through one of the accepted paths.

4. HO6 Walls-In Coverage: Rules Got Specific

HO6 (unit owner's "walls-in" coverage) requirements got tightened in some places and clarified in others. The short version:

• HO6 is required when the master policy doesn't cover the unit's interior, OR when the master policy has a per-unit deductible.
• Coverage amount must equal whatever it would cost to restore the unit OR the per-unit deductible amount, whichever applies.
• Replacement cost is required on the HO6.
• The deductible cap is now explicit: greater of 5% of coverage or $2,500.

The clarification matters more than the change. Before, the question of when HO6 was required and what the deductible cap was got handled inconsistently by lender and project. Now the floor is the same across the board.

5. PERS Is Retired for Attached New Construction

PERS (the Project Eligibility Review Service) was the heavy review path for newly constructed attached condo projects — a separate, lender-paid review process that added weeks and cost to new-construction condo financing.

That requirement is retired for attached newly constructed condos. New-construction condo files no longer need to clear PERS to be Fannie-eligible.

This one is more of an internal lender process change than a borrower-facing change. But if you're buying a new-construction condo in a project that was being held up by PERS review, the path just got shorter.

What This Doesn't Change

A few things to be clear about, so the relief here is real and not a sales pitch.

• These changes don't make every previously ineligible condo project eligible. Buildings with active litigation, critical-repair findings, or major structural issues still fail project review. Reserve adequacy still matters.
• New and newly converted projects still have presale requirements. The investor-concentration change applies only to established projects.
• The master insurance flexibility doesn't mean less coverage — it means more paths to document 100% replacement cost coverage. Underinsured buildings are still underinsured.
• Project ineligibility on the Fannie or Freddie side doesn't necessarily mean non-warrantable forever. Non-QM condo financing has been the workaround for ineligible projects, and that path is still there. The rule changes just make more projects eligible on the agency side, which usually means better pricing for the borrower.

What to Do If You've Been Told "No" on a Condo

If a condo purchase or refinance got blocked in the last 1-2 years because of project review, master insurance, or investor concentration — it's worth running it again. Some files that were ineligible in 2024 or 2025 are eligible now. The conditions are project-specific, so the only way to know is to put the actual building through current eligibility review.

If you're shopping for a condo now in Colorado, California, Oregon, or Texas, this widens the field of buildings that can actually produce a competitive agency loan. That matters most in the markets where condo inventory leans toward small buildings, older conversions, or investor-heavy complexes — which is most of the markets we cover.

The changes that took effect in March were one part of a broader set of guideline updates that also touched income calculation rules for self-employed and variable-income borrowers. We'll cover those separately. (Internal placeholder: link to forthcoming FNMA income article at /articles/fnma-income-rules-march-2026 when it ships.)

The Takeaway

Five rules that used to block condo loans in markets like Boulder, downtown Denver, the California coast, and Texas investor-heavy complexes are now looser. The Project Waiver covers larger buildings. Investor concentration no longer caps established projects. Master insurance has more flexible documentation paths. HO6 rules are clearer. PERS is retired for attached new construction.

If you've got a specific building in mind, run it through current eligibility. The answer may be different than it was last year.

Run your numbers in the rate tool → — see what a condo loan looks like under current pricing, or send us the building details and we'll check eligibility.

Source: Fannie Mae and Freddie Mac condo guideline updates as communicated through Keystone Funding lender bulletin, March 27, 2026. Agency guideline references: Fannie Mae Selling Guide condo project standards; Freddie Mac Single-Family Seller/Servicer Guide condo project requirements.

NetRate Mortgage is a mortgage broker licensed in California, Colorado, Oregon, and Texas. NMLS #1111861. David Burson NMLS #641790. Equal Housing Opportunity. Rates and program availability are subject to change without notice. Not a commitment to lend. Actual rates, terms, and eligibility depend on individual circumstances and current investor guidelines.