Every condo purchase needs two approvals. The first is yours — income, credit, down payment. The second is your building's, and it happens without you in the room: before Fannie Mae or Freddie Mac will buy a conventional loan, the condominium project has to pass a project review against their published standards. Pass, and the building is "warrantable" — conventional financing flows. Fail even one item, and every agency lender has to decline every unit in the building, no matter how strong the individual buyer is.
This guide lays out exactly what the agencies check — the real guideposts from the Fannie Mae Selling Guide — what changed in 2026 to make the review stricter, and the full set of options when a building doesn't pass. Sea View Mortgage is a Monmouth County–based lender led by President / Loan Officer Philip Wallace (25+ years); project-review files — warrantable, non-warrantable, condotel, co-op — are a standing specialty here, at the Jersey Shore and in Florida.
Your lender declined the project. That is not the same as the project being unlendable.
Call (732) 443-4859 or start your pre-approval online today.
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Reviewed by Philip Wallace, President / Loan Officer, NMLS #404069 · Last reviewed: November 2026
Sources: Fannie Mae Selling Guide B4-2.1 and B4-2.2 (condominium project standards); Fannie Mae Lender Letter LL-2026-03; Freddie Mac Single-Family Seller/Servicer Guide Chapter 5701. Agency guidelines change; the figures below are the published guideposts as of November 2026, and the lender's review of the actual project controls.
When you apply for a conventional loan on a condo, the lender orders a condominium project questionnaire (Fannie Mae Form 1076 / Freddie Mac Form 476) from the HOA or its managing agent, together with the project's budget, master insurance policy, and litigation information. The answers are tested against the Selling Guide — often run through Fannie Mae's Condo Project Manager (CPM) system. Two things surprise buyers:
New for 2026 — the review got stricter. Under Fannie Mae Lender Letter LL-2026-03 (Freddie Mac published a matching change), the streamlined Limited Review was retired for established projects with more than 10 units for loan applications dated on or after August 3, 2026 — the path that used to wave many projects through on a short questionnaire. Nearly every condo now gets the Full Review and the full questionnaire. Two more ratchets: master-policy per-unit deductibles are capped at $50,000 (applications from July 1, 2026), and the minimum reserve funding rises from 10% to 15% of budgeted assessment income for applications dated on or after January 4, 2027 — meaning some buildings that pass today will not pass in January.
1. Dues delinquency. No more than 15% of units may be 60 or more days past due on HOA assessments — and the same 15% test applies to each special assessment. A building full of neighbors who stopped paying is the most common quiet killer of condo loans.
2. Reserves. The HOA budget must allocate at least 10% of annual budgeted assessment income to replacement reserves (roofs, elevators, paving) — rising to 15% in January 2027 (see above). Underfunded reserves read as deferred maintenance waiting to become a special assessment.
3. Single-entity ownership. One person or entity may hold no more than 2 units in an 11–20-unit project, and no more than 20% of units in a project of 21 or more. A developer or investor holding a big block concentrates the building's risk in one pair of hands.
4. Commercial space. Non-residential space — shops, offices, parking operations — may not exceed 35% of the project's total floor area. Mixed-use shore buildings trip this one regularly.
5. Sell-out and HOA control (newer projects). A project counts as "established" when at least 90% of units have been conveyed to buyers, construction is complete, and the developer has turned HOA control over to the owners. Before that point, projects face additional sell-out and phasing scrutiny — which is why the first buyers in the best new buildings hit the wall most often.
6. Litigation. Pending or threatened litigation involving structural integrity, safety, or habitability is disqualifying. Routine matters (minor disputes, small claims within the published exceptions) may pass — but construction and safety suits are the hardest no in the conventional system.
7. Insurance. The project must carry a master policy covering full replacement cost, walls-in coverage, and fidelity coverage for the association — with the per-unit deductible capped as noted above. Lapses or thin coverage fail the review on their own.
8. Hotel features and short-term rentals. A project that operates as a condo-hotel — front desk, nightly rentals, rental pool — is ineligible outright, as are projects with other hotel-like characteristics. That's a separate property category with its own financing channel (see Options).
9. Owner-occupancy and investor concentration. The agencies expect established projects to be predominantly owner-occupied or second homes; heavy investor concentration draws extra scrutiny, and for investment-property loans the project is expected to clear an owner-occupancy guidepost. Rental-heavy shore buildings live on this line.
10. Deferred maintenance and special assessments. Post-2021, reviewers dig into structural inspections, known deferred maintenance, and pending special assessments. A building hiding a seven-figure roof problem will surface here — in the budget, the minutes, or the questionnaire.
The practical point: "non-warrantable" is a status, not a verdict on the building's worth — and it's a status with an expiration date in many cases. The options below exist for the meantime.
Buying in a building you're not sure about — or already holding a denial that names the project? Send us the building before you send an offer.
Call Philip Wallace at (732) 443-4859 or start your pre-approval online.
What does "warrantable" mean?
It means a condominium project meets the project-eligibility standards Fannie Mae and Freddie Mac publish in their selling guides, so conventional lenders can make loans in the building and the agencies will buy them. A project that fails any standard — delinquency over 15%, underfunded reserves, too much commercial space, one owner holding too many units, structural litigation, hotel-style operation — is non-warrantable. The term describes the building, never the borrower.
What is the condo questionnaire?
It's Fannie Mae Form 1076 (Freddie Mac Form 476), completed by the HOA or its managing agent, reporting the project's ownership mix, delinquency rates, budget and reserves, insurance, litigation, and rental rules. Your lender orders it, and the answers are tested against the project standards — it's the document a project review is built on. Since August 2026, the full questionnaire is required on nearly every condo loan, because the streamlined Limited Review was retired for most projects.
Did condo rules really get stricter in 2026?
Yes. Fannie Mae Lender Letter LL-2026-03 (with a matching Freddie Mac change) retired Limited Review for established projects over 10 units for applications dated on or after August 3, 2026, capped master-policy per-unit deductibles at $50,000 from July 1, 2026, and raises the minimum reserve allocation from 10% to 15% of budgeted assessment income for applications dated on or after January 4, 2027. More buildings are getting full scrutiny, and the reserve bar rises again in January.
My building failed one item. Does every lender have to say no?
Every agency lender does — the standards bind anyone selling loans to Fannie Mae or Freddie Mac, and borrower strength can't waive them. But non-warrantable, portfolio, and non-QM programs exist outside those standards and underwrite the project on its merits. One failed item is the end of the conventional conversation, not the end of the purchase.
Can a non-warrantable building become warrantable later?
Often, yes. Delinquency ratios improve as owners catch up or units turn over, budgets can fund reserves properly (and from January 2027 must fund 15%), developers sell their remaining units and hand over HOA control, and litigation resolves. When the facts change, the status can change — and a loan closed through an alternative channel can frequently be refinanced into conventional terms afterward.
Who orders the questionnaire, and how long does project review take?
Your lender orders it from the HOA or managing agent when the file opens; associations typically charge a fee for completing it, which varies by building. The review itself is fast once documents arrive — the variable is the association's responsiveness, which is why we order the package on day one and stay on it. A slow HOA is the most common reason condo files take longer than house files.
Sea View Mortgage — Philip Wallace, President / Loan Officer, NMLS #404069 · Company NMLS #1706303
27 Beach Rd Suite 5A, Monmouth Beach, NJ 07750
Phone: (732) 443-4859
Equal Housing Lender. This site is not authorized by the New York State Department of Financial Services. No mortgage solicitation activity or loan applications for properties located in the State of New York can be facilitated through this site. Loans are arranged through third-party lenders. All loans subject to credit and property approval. This is not a commitment to lend. This page summarizes condominium project standards published by Fannie Mae and Freddie Mac for general information; agency guidelines change, and eligibility for any loan is determined by the applicable agency or investor guidelines in effect at application and by the lender's review of the specific project and borrower. Non-warrantable, condotel, portfolio, and non-QM loan programs are offered through participating investors; eligibility, project requirements, and program terms vary by investor and by project and are subject to change.