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 changes came through lender channels — Fannie's Lender Letter LL-2026-03 on March 18, and a broader bulletin on March 27 — and most took effect immediately. They 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 loosened, what's tightening next, and what it all 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

This is the one that quietly cost the most people money, and most of them never knew it existed.

If more than half the units in your building were owned by investors — rentals, short-term rentals, second homes that aren't owner-occupied — the entire building used to be ineligible for conventional financing. Not just the investors. Everyone. Including you, living in your unit, paying your mortgage, minding your own business. You didn't do anything wrong. You just lived in a building where too many of your neighbors rented their units out, and Fannie Mae treated the whole building like a risk. That meant you couldn't refinance into a conventional loan, and if you wanted to sell, your buyer couldn't either — leaving portfolio loans or cash buyers as the only way out.

That 50% investor concentration ceiling is now removed for established projects. A building that's 70% rentals can qualify for conventional loans again — for owner-occupants, investors, everyone. 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, and Colorado mountain communities like Summit and Eagle counties. Investors and owner-occupants alike who were locked out by the concentration cap now have a path back.

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.

There's also a new, clear standard on the HOA's master-policy deductible: a cap of $50,000 per unit, effective July 1, 2026. That replaces the inconsistent, lender-by-lender decisions that used to happen and gives associations a number to plan around.

What it means in California coastal and Colorado 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 wildfire-exposed zones. Colorado has the same pressure in hail-prone areas. 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 overall coverage meets 100% of replacement cost through one of the accepted paths.

4. HO6 Walls-In Coverage: Rules Got Specific

HO6 (the 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 unit-owner deductible cap is now explicit: greater of 5% of coverage or $2,500.

Note this is a different deductible than the $50,000 master-policy cap above — this one is on your individual HO6 policy as the unit owner; that one is on the HOA's master policy. 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's Also Changing — and Tightening — Later in 2026 and 2027

The five changes above are the relief. But the same guideline cycle also set two changes in motion that cut the other way, and if you own in a condo or sit on an HOA board, they matter just as much.

Limited Review is going away on August 3, 2026. Fannie Mae is retiring the Limited Review process, which handled roughly 40% of all condo project reviews. Starting August 3, every established condo project will need a Full Review (or has to qualify for the Waiver described in #1). Full Reviews require more documentation from the HOA and more verification from the lender — which means more time per transaction and more work for associations to stay compliant. If you're planning a condo purchase or refinance in the back half of 2026, build in extra time.

Reserve requirements go from 10% to 15% on January 4, 2027. The minimum reserve allocation for condo projects rises from 10% to 15% of the annual budgeted assessment income. HOAs that don't meet the threshold could lose conventional financing eligibility — which affects every owner in the building, not just the board. If your association is at 10% reserves today, this is the one to start planning for now. Raising assessments to hit 15% takes time and board approval, and January 2027 is closer than it looks.

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 — and it's about to matter more.
• 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. Most agents don't track Fannie Mae guideline changes, so if you've been told a building "doesn't qualify for financing," that's a question for your lender, not a closed door.

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 cover those in the March income-rule changes.

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. Two more changes — the end of Limited Review in August 2026 and higher reserve requirements in January 2027 — tighten the other direction, so the window to get an easy review on some buildings is actually narrowing.

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.

Sources: Fannie Mae Lender Letter LL-2026-03 (published March 18, 2026) and Fannie Mae / Freddie Mac condo guideline updates as communicated through a Keystone Funding lender bulletin dated 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.