New Condo Lending Guidelines: What Every Condo Buyer Should Know

If you're thinking about buying a condo, there's something new happening behind the scenes that could impact your financing.

Fannie Mae and Freddie Mac have updated their condominium lending guidelines, and while these changes aren't meant to make buying a condo more difficult, they do place greater emphasis on the financial health of the condominium association itself.

In other words, it's no longer enough for a buyer to qualify for the loan. The condo community has to qualify too.

Why the Changes?

The collapse of the Champlain Towers South condominium in Surfside, Florida highlighted the consequences of deferred maintenance and underfunded reserve accounts. Since then, lenders have been placing greater emphasis on ensuring condominium associations are financially prepared to maintain their buildings over the long term.

The latest guideline updates continue that shift by encouraging stronger financial oversight and more comprehensive reviews of condominium communities before loans are approved.

What Are Lenders Looking At?

Today's lenders are paying much closer attention to factors such as:

• Reserve funding for future repairs
• Deferred maintenance or structural concerns
• Master insurance coverage
• Financial stability of the homeowners association
• Pending special assessments
• HOA documentation during underwriting

These items help determine whether a condominium project is eligible for conventional financing.

One Positive Change

One piece of good news is that lenders have moved away from placing as much emphasis on owner occupancy ratios in many established condominium communities.

Previously, communities with a higher percentage of rental units often faced additional financing hurdles. While every project is still reviewed individually, the overall focus has shifted toward the long term financial health of the association rather than simply how many units are owner occupied.

What If a Condo Doesn't Qualify?

If a condominium community doesn't meet conventional lending guidelines, it doesn't necessarily mean you can't buy it.

In many cases, buyers can still obtain financing through a portfolio lender. These loans are held by the bank rather than being sold to Fannie Mae or Freddie Mac. Portfolio loans may have different interest rates, down payment requirements, or underwriting standards, but they can provide an excellent alternative for certain properties.

What Buyers Should Ask Before Making an Offer

As part of your due diligence, it's worth asking questions such as:

• Does the HOA have adequate reserve funds?
• Has a reserve study been completed recently?
• Are there any upcoming special assessments?
• Has the association deferred major maintenance?
• Is there any pending litigation?
• Does the association carry adequate insurance?

These aren't questions most buyers think to ask, but they can have a significant impact on financing, future expenses, and resale value.

Bottom Line

Buying a condo today requires looking beyond the unit itself.

A beautiful kitchen and updated flooring are important, but so is the financial health of the community you're buying into. A well managed condominium association can help protect property values, reduce the likelihood of unexpected assessments, and make financing smoother for future buyers.

If you're considering purchasing a condo in Central Ohio, I'll help you evaluate not only the property itself, but also the strength of the homeowners association so you can make an informed decision before writing an offer.

Margaret Lipp | REMAX Premier Choice

Serving Upper Arlington, Dublin, Worthington, Clintonville, Hilliard, Powell, Grandview, and all Central Ohio communities

Data sourced from the Columbus REALTORS® Central Ohio Housing Report, based on statistics from the Columbus & Central Ohio Regional MLS. Figures reflect closed and reported activity as of the report's publish date and are subject to revision.