Condo Financing Rules Are Changing: What Buyers & Sellers Need to Know

If you're planning to buy or sell a condo or certain townhomes, there are some important financing changes happening that could affect your next move.

Beginning August 3, 2026, lenders are required to take a much closer look at the financial health of most condominium associations before approving a conventional mortgage. Then, another significant change arrives on January 4, 2027, raising the standards for how condo associations fund future repairs and maintenance.

It's important to note that many townhomes are legally classified as condominiums, meaning these financing changes may apply to them as well. If you're unsure whether your townhome is affected, we'd be happy to help you find out.

Here's what these changes mean and why they matter.

The Biggest Change Starts Now

Until now, many established condo associations qualified for a simplified lender review, often called a Limited Review. As of August 3, 2026, that option has largely gone away.

Instead, most conventional condo loans will now require a Full Review of the homeowners association (HOA).

That means lenders will carefully review items such as:

- The association's annual budget
- Reserve fund balances
- Reserve studies
- Insurance coverage
- Financial statements
- Other HOA documents that help determine the association's overall financial health

The goal is to reduce the risk of buyers purchasing into communities that may not have enough money set aside for future repairs or could face costly special assessments.

Another Change Is Coming in 2027

Starting January 4, 2027, most condo associations will also need to dedicate at least 15% of their annual assessment income to reserve funds unless they have a qualifying professional reserve study that supports a different funding level.

This is an increase from the previous 10% guideline and is intended to encourage stronger long-term financial planning for condominium communities. Associations that don't meet these requirements could make it more difficult for buyers to obtain conventional financing.

What This Means for Condo & Townhome Sellers

These changes don't mean your property won't sell. However, if your HOA has low reserve balances, deferred maintenance, outdated financial records, or doesn't meet the new lending guidelines, it could reduce the number of buyers who qualify for conventional financing.

Fewer qualified buyers can sometimes mean:

- Longer time on the market
- More negotiating around price and terms 

If you've been thinking about selling within the next year, it's worth understanding how your association's financial health may affect your home's marketability.

What This Means for Condo & Townhome Buyers

Today's buyers need to look beyond the home itself. A beautiful condo or townhome isn't enough if financing becomes an obstacle because of the association's finances.

Before writing an offer, it's a good idea to work with an experienced real estate agent and lender who can identify potential issues early. Understanding an HOA's reserves, financial planning, and overall stability can help you avoid surprises later in the transaction.

Every Association Is Different

These new lending standards will not affect every condominium or townhome community the same way.

Many associations already maintain strong reserves and excellent financial records, while others may need time to adjust to the new requirements. That's why it's more important than ever to have professionals helping you evaluate both the property and the association before buying or selling.

Thinking About Buying or Selling a Condo or Townhome?

Whether you're a condo or townhome owner wondering how these changes affect your home's value, or you're looking to purchase with confidence, we're here to help.

The Sandy Erickson Real Estate Team works closely with experienced lenders who stay current on changing financing guidelines. We'll help you understand how these updates apply to your specific situation so you can make informed decisions and avoid unnecessary surprises.

If you're considering buying or selling a condo or townhome, reach out today. We'd be happy to answer your questions and help you create a plan.