If you're considering buying or selling a condo in Arizona, new Fannie Mae condo financing rules in 2026 could affect how easily a buyer can obtain a mortgage—and potentially how marketable a condo is for sellers.

Fannie Mae has updated its condominium project review, reserve funding and insurance requirements. One of the biggest changes is the retirement of the Limited Review process for applicable condo loans beginning August 3, 2026. Additional reserve requirements take effect in 2027.

These are Fannie Mae lending requirements, not Arizona laws, and they don't affect every condo in exactly the same way. However, because conventional financing is commonly used to purchase condos, Arizona buyers and sellers should understand how the changes may affect them.

What Are the New Fannie Mae Condo Rules?

The biggest change is the retirement of Limited Review for applicable condo loan applications dated August 3, 2026, or later. More condominium projects may now require a Full Review, which means lenders may need additional information about the HOA and the overall property, including:

  • HOA finances and reserves
  • Special assessments
  • Insurance coverage and deductibles
  • Major repairs and deferred maintenance
  • Recent inspections
  • HOA delinquencies
  • Pending litigation

There are exceptions. Certain smaller projects, including some with 10 or fewer units, may qualify for a project-review waiver.

Another important change takes effect January 4, 2027, when the minimum replacement-reserve funding requirement for applicable Full Review projects increases from 10% to 15%, unless the project qualifies to use an acceptable reserve study.

A new $50,000 per-unit maximum deductible for required property insurance also applies to applicable loans beginning July 1, 2026.

What This Means for Condo Sellers

Your HOA can affect your ability to sell. Even if your condo is beautifully updated and priced correctly, a buyer could have difficulty getting conventional financing if the condominium HOA doesn't meet Fannie Mae requirements.

Before listing, ask your HOA for:

  • Current budget and financial statements
  • Reserve information or reserve study
  • Master insurance policy and deductibles
  • Current or upcoming special assessments
  • Recent inspection reports
  • Information about major repairs or deferred maintenance
  • HOA delinquency information
  • Pending litigation information

Getting these documents early can help uncover potential financing issues before you accept an offer.

Questions Sellers Should Ask Their Agent

"Is this condo project currently financeable for conventional buyers?"

Your agent can't make the final lending determination, but they can help identify potential red flags.

"Have buyers had financing problems in this community?"

Recent transactions may provide useful information about whether buyers have experienced financing issues.

"Are there any HOA issues that could affect a buyer's financing?"

Your agent should help you identify questions that need to be addressed with the HOA and lender.

"Should we have the project reviewed before listing?"

If there are potential concerns, discovering them before marketing your property can prevent surprises later.

What This Means for Condo Buyers

Getting pre-approved doesn't necessarily mean you're approved for every condo. With a condo purchase, the lender may need to evaluate both you and the condominium project. A condo may be difficult to finance if the HOA has inadequate reserves, insurance problems, significant deferred maintenance, certain special assessments or other issues that don't meet applicable Fannie Mae requirements.

Questions Buyers Should Ask Their Agent

"Has this community been successfully financed recently?"

Recent conventional sales can provide helpful context, although they don't guarantee your loan will qualify.

"Are you aware of any financing issues with this HOA?"

Your agent may know of past problems that deserve further investigation.

"Can we get the HOA's financial and insurance documents?"

Don't wait until the last minute. HOA documents can take time to obtain.

"Are there any current or planned special assessments?"

Understand both approved assessments and major upcoming projects.

"Are there any major repairs or deferred maintenance?"

Pay attention to roofs, balconies, exterior structures, plumbing, elevators and other common elements.

"Has my lender reviewed this specific condominium project?"

This is one of the most important questions to ask.

 What If a Condo Doesn't Qualify for Fannie Mae Financing?

A condo that doesn't meet Fannie Mae requirements isn't necessarily unsellable. Depending on the circumstances, a buyer may be able to use:

  • Cash
  • Portfolio financing
  • Other alternative loan programs
  • FHA financing, if the project meets applicable FHA requirements

However, fewer financing options can mean a smaller pool of potential buyers, which could affect the property's marketing time and negotiating power.

What Arizona Condo Buyers and Sellers Should Remember

The new Fannie Mae condo financing rules for 2026 don't mean Arizona condos are becoming impossible to finance. They do mean that the HOA matters more than ever.

For sellers:

Your HOA's finances, reserves, insurance and physical condition can affect your property's marketability.

For buyers:

Your personal mortgage pre-approval isn't enough. Your lender also needs to determine whether the specific condominium project meets applicable requirements.

For both:

Ask questions early - before you're under contract. If you're considering buying or selling a condo in Phoenix, Scottsdale, Tempe, Chandler, Mesa, Fountain Hills or elsewhere in Arizona, an experienced real estate agent can help you identify potential issues and coordinate with your lender and HOA.

Thinking about buying or selling a condo in Phoenix or surrounding communities? Let’s talk about it! Contact me at 480-529-5893 or amy@brooksrealestategroup.com anytime to discuss your specific situation.

 

This article is for general educational purposes and is not legal, tax or mortgage advice. Fannie Mae requirements can change, and individual lenders may have additional underwriting requirements. Always confirm current requirements with your mortgage professional.