A word from your neighbor mortgage lender and Beach Drive Blog Sponsor.

We have several condominium projects that line Beach Drive and Alki in West Seattle and I thought this is too important to not share. There are major changes that are taking place with regards to financing condos.

Fannie Mae and Freddie Mac — which set the rules behind most home loans — recently updated how they evaluate condo buildings. When someone gets a mortgage on a condo, the lender isn’t just qualifying the buyer, they’re qualifying the building too, looking at the HOA’s reserves, budget, and insurance. If a building doesn’t measure up, it can lose eligibility for standard financing, which shrinks the buyer pool and affects resale values for everyone in the building, not just one owner.

What’s changing:

• No more investor concentration limit. There are still units to how many a person or entity can own in a condo development.
• A limited review option some buildings has been phased out, meaning more buildings face full financial review. (If your condo has 10 units or less, it may be eligible for a Waiver of Project Review). 
• Insurance requirements are getting more specific
• HOA reserve requirements are rising from 10% to 15% of the annual budget (required by January 2027)

One thing worth knowing: this isn’t just a “conforming loan” issue – many lenders rely on Fannie Mae and Freddie Mac’s metrics to determine whether or not a condo is “warrantable”. If a condo is determined to be “non-warrantable” it often means that the mortgage programs that are available may require larger down payments to qualify for along with higher interest rates.

Why it matters even if you’re not selling: your neighbors’ ability to sell or refinance depends on the whole building’s standing, not just their own finances. It’s worth asking your HOA board a few questions — is the reserve study current and is the budget funding toward it — so the condo owners aren’t caught off guard.

Questions? I’m always happy to help a neighbor! 

More information here: Changes to Conforming Guidelines for Condos