Will This Condo Qualify for Financing? The 2026 Rules Every Michigan Buyer and Agent Should Know
Condo financing rules changed in 2026 — higher reserve minimums and no more fast-track reviews. A Grand Rapids broker explains how to check a condo before offering.
Guideline details current as of September 2026. Condo project standards changed significantly in 2026 and continue to roll out — verify current requirements before acting.
Quick answer
A condo unit can only get standard conventional financing if the entire project is "warrantable" — meaning the association's finances, insurance, ownership, and legal standing all meet Fannie Mae and Freddie Mac's standards. If any single test fails, every unit in the building is affected, not just yours. (cite index="20-1,24-1">In 2026 the rules got stricter: reserve minimums rose from 10% to 15% of the annual budget, and the fast-track "Limited Review" was eliminated for projects with more than 10 units, so every one of those projects now goes through a full review.</cite>
The practical consequence: more condos will fail financing checks in 2026 than in prior years, and the worst time to find out is three weeks into your contract. The fix is checking before you write the offer — which takes a lender about a day.
Why a condo is different from a house
When you buy a house, the lender evaluates you and the house. When you buy a condo, the lender evaluates you, the unit, and the entire association — its budget, reserves, insurance, litigation, and who owns the other units.
That's because your unit's value depends on the building's health. A well-run association protects the lender's collateral; an underfunded one with a leaking roof and a lawsuit doesn't. So Fannie Mae and Freddie Mac — who buy the majority of conventional mortgages — set project-level standards. A project that meets them is "warrantable." One that doesn't is "non-warrantable," and (cite index="18-1">non-warrantable loans typically require larger down payments, higher interest rates, and harder qualification requirements</cite>.
What changed in 2026
(cite index="18-1">On March 18, 2026, Fannie Mae issued Lender Letter LL-2026-03 and Freddie Mac released a corresponding bulletin — the most significant round of condominium lending updates in several years. Some changes took effect immediately; others roll out through the rest of 2026 and into early 2027.</cite> The ones that matter to buyers:
Reserves: 15%, not 10%. (cite index="24-1">HOAs must now budget at least 15% of annual assessment income to replacement reserves, up from 10%, or risk losing warrantable status.</cite> (cite index="16-1">Many older buildings that historically budgeted 5–8% for reserves will fail this threshold.</cite>
Limited Review is gone for most projects. (cite index="23-1">For loan applications dated on or after August 3, 2026, the fast-track options no longer exist — every condominium project with more than 10 units goes through a full review.</cite> Full review means the lender examines the association's financials, reserves, and maintenance in depth. It takes longer and it catches more.
A new insurance test. (cite index="21-1">If a condominium association's master property insurance policy carries a per-unit deductible exceeding $50,000 on or after July 1, 2026, the project is classified as non-warrantable under conventional guidelines.</cite> Where the master policy has a per-unit deductible, the buyer's own HO-6 policy generally needs to cover at least that amount.
One rule got easier. (cite index="24-1">Both agencies eliminated the rule that made condos non-warrantable if more than 50% of units were investor-owned</cite> — good news for buildings with a lot of rentals. Don't confuse this with presale requirements on new construction, which still apply.
Small projects got a break. (cite index="23-1">The full-review waiver, previously capped at projects of four or fewer units, now extends to developments with up to 10 units</cite>, provided they meet conditions like not being part of a larger master association and carrying proper master insurance.
The warrantability checklist — the tests a project has to pass
Think of it as six tests. Fail one and the whole building is non-warrantable.
| Test | What lenders look for | Common failure |
|---|---|---|
| Reserves | At least 15% of the annual budget going to replacement reserves, or a current reserve study | Older buildings budgeting 5–10% |
| Delinquencies | Not too many owners behind on dues | (cite index="22-1">More than 15% of unit owners 60+ days overdue</cite> |
| Ownership concentration | No single owner or entity holding too many units | (cite index="23-1">One person or investment group owning more than 20% of units</cite> |
| Litigation and repairs | No active lawsuits over structural, safety, or major financial issues; no unresolved critical repairs | (cite index="22-1">Structural-defect litigation or deferred maintenance results in immediate disqualification</cite> |
| Insurance | Adequate master policy with a per-unit deductible at or under $50,000 | High-deductible policies adopted to cut premiums |
| Commercial use and operations | Limited commercial space; no hotel-style operation | (cite index="20-1">More than 35% commercial space, or condo-hotel operations</cite> with front desks and rental pools |
A West Michigan note: "site condos" are usually fine
A lot of West Michigan subdivisions — especially newer ones in Kent and Ottawa counties — are legally structured as site condominiums: detached, single-family homes on individually owned lots, organized as a condo association for shared roads, drainage, or common areas. If your "condo" is actually a freestanding house, breathe easier. Detached condo units generally don't go through the full project review that attached units do, and financing for them typically looks like financing any other house.
The buildings this article is really about are attached condos — downtown Grand Rapids mid-rises, lakeshore developments in Holland and Grand Haven, and older garden-style complexes across the region. Those are where reserve levels, deductibles, and litigation matter.
How to check a condo before you write the offer
This is the part that saves earnest money. None of it costs anything.
- Ask your lender to run the project. Lenders can check the project's status in Fannie Mae's Condo Project Manager system and can review a project's documents ahead of a contract. As a broker, I can also check whether the project is already on a lender's approved list — a project that recently closed a conventional loan through the same channel is a strong sign. (cite index="16-1">There is no public database where buyers can look up conventional approval status themselves</cite>, so this goes through the lender.
- For FHA financing, check HUD's list. FHA maintains a searchable approved-condominium list on its website, and single-unit approvals exist for units in projects that aren't on it. This one you can look up yourself.
- Request the association's documents early — budget, reserve study, master insurance declarations, and recent board minutes. A good listing agent can get these fast. What you're scanning for: the reserve percentage, the deductible, any special assessments, and any mention of litigation or major repairs.
- Ask the listing agent two direct questions: "Has a conventional loan closed in this building in the last twelve months?" and "Is there any pending litigation or special assessment?" The answers tell you most of what you need.
- Write the financing contingency deliberately. If the project's status isn't confirmed before the offer, make sure your contingency protects you if the building fails review.
If the condo is non-warrantable
Not the end of the deal — but a different deal. The honest picture:
- Non-warrantable financing exists through portfolio and specialty lenders. As a broker with access to non-QM lenders, this is a path I can actually pursue for a buyer. (cite index="20-1">Current lender matrices commonly cap loan-to-value on non-warrantable condos around 70% to 80%</cite> — meaning 20–30% down — and rates run higher than conventional.
- Some causes are fixable; some aren't. (cite index="20-1">A reserve issue may be fixable with a budget change, but hotel-style operations, excess commercial space, safety-related litigation, or unresolved critical repairs are much harder to work around.</cite> Knowing why a project fails tells you whether waiting or negotiating makes sense.
- The honest trade-off: a non-warrantable loan costs more, and resale is harder because the next buyer faces the same constraint. That doesn't make the purchase wrong — it makes it a decision that deserves the math in front of you, not a surprise at closing.
- Sometimes the right answer is a different building. I'll say that when it's true.
Frequently asked questions
What does "warrantable condo" mean? A condo project that meets Fannie Mae and Freddie Mac's standards for reserves, insurance, ownership, delinquencies, litigation, and commercial use — making its units eligible for standard conventional financing.
Can I get a mortgage on a non-warrantable condo? Often yes, through specialty or portfolio lenders, typically with a larger down payment and a higher rate. The reason the project is non-warrantable determines how realistic the options are.
What are the 2026 condo rule changes? The major ones: reserve minimums increased from 10% to 15%, the Limited Review fast-track was eliminated for projects over 10 units (for applications on or after August 3, 2026), a $50,000 cap on master-policy per-unit deductibles took effect July 1, 2026, and the investor-concentration rule was eliminated.
How do I know if a condo is FHA-approved? HUD publishes a searchable approved-condominium list. Units in unapproved projects may still qualify through FHA's single-unit approval process.
Is a site condo the same as a regular condo for financing? Usually not. Detached site condos generally avoid the full project review that attached condos face, and financing typically works like a standard house. Confirm with your lender on any specific property.
How long does a condo project review take? Once the association's documents are in hand, often a few business days — but gathering the documents can take longer, which is why starting before the offer matters.
Who do you work with in West Michigan? Buyers, sellers, and agents across Grand Rapids, Grandville, Wyoming, Kentwood, Rockford, Ada, Jenison, Caledonia, Holland, Grand Haven, and the surrounding Kent, Ottawa, Allegan, and Barry county communities.
Looking at a condo — or an agent with a condo listing that's had financing fall through? Send me the address before anyone writes an offer. I'll run the project, tell you what it will and won't qualify for, and if the honest answer is "this building's going to be a problem," you'll hear it before it costs anyone earnest money.
Joe Bastien · Bastien Mortgage LLC NMLS #2392887 · Company NMLS #2852005 616-369-0021 · joe@bastienmtg.com · bastienmortgagemi.com 446 Hubbard St NE, Grand Rapids, MI 49525 Equal Housing Opportunity
This article is educational and is not a loan offer, approval, or commitment to lend. All loans are subject to underwriting and project approval. Condo project standards are set by Fannie Mae, Freddie Mac, FHA, and individual lenders and change periodically — details current as of September 2026; verify current requirements before acting.