If you sell condominiums in California, understanding today’s condo financing rules can make the difference between a successful closing and a cancelled escrow.

If you sell condominiums in California, understanding today’s condo financing rules can make the difference between a successful closing and a cancelled escrow.

Following the tragic collapse of the Champlain Towers South condominium in Surfside, Florida, Fannie Mae and Freddie Mac introduced significantly stricter condominium lending guidelines. Their goal is to ensure that condominium communities are financially stable and structurally sound before buyers can obtain conventional financing.

While these changes improve consumer protection, they have also created new financing challenges for California REALTORS®, buyers, sellers, and homeowners associations (HOAs).

Why California Condo Financing Has Changed

Today’s lenders don’t just qualify the borrower—they also evaluate the condominium project itself.

A community may become non-warrantable, meaning it no longer qualifies for conventional financing backed by Fannie Mae or Freddie Mac.

Common reasons include:

• Insufficient HOA reserve funding
• Pending or active litigation
• Deferred maintenance
• Structural safety concerns
• Large special assessments
• Inadequate insurance coverage
• High investor ownership
• Commercial space exceeding agency guidelines
• HOA financial instability

When a condominium project becomes non-warrantable, buyers typically need specialized financing instead of traditional conventional loans.

What Is a Non-Warrantable Condo?

A non-warrantable condominium is a project that does not meet Fannie Mae or Freddie Mac eligibility requirements.

That doesn’t mean the property cannot be financed.

It simply means buyers need a lender that specializes in California non-warrantable condo financing.

These loan programs can often finance communities affected by:

• Litigation
• Reserve shortages
• Insurance challenges
• Deferred maintenance
• Pending structural repairs
• Other HOA-related issues

Why REALTORS® Should Verify Condo Financing Before Listing

One of the most common reasons condominium escrows fail is because financing eligibility isn’t investigated until after the purchase contract has been accepted.

By then, buyers may have already spent thousands of dollars on:

• Home inspections
• Appraisals
• HOA document fees
• Loan processing costs

Only to discover that the project is ineligible for conventional financing.

Before listing a condominium—or writing an offer—REALTORS® should determine whether the project qualifies for:

• Fannie Mae financing
• Freddie Mac financing
• Non-warrantable condominium financing

Early due diligence helps avoid surprises and keeps transactions moving.

New Fannie Mae Condo Rules Beginning August 2026

For many loan applications dated on or after August 3, 2026, lenders will generally be required to complete a comprehensive condominium project review instead of using the previous limited review process.

A full review typically includes:

• HOA questionnaire
• Annual operating budget
• Insurance policies
• Reserve study
• Financial statements
• Delinquency reports
• Special assessment information
• Litigation disclosures
• Meeting minutes
• Governing documents (CC&Rs and Bylaws)

Submitting these documents does not automatically qualify the project. Lenders must verify that the community complies with current Fannie Mae requirements.

HOA Reserve Requirements Increase in January 2027

Beginning January 4, 2027, Fannie Mae’s minimum reserve funding requirement is expected to increase from 10% to 15% of an HOA’s annual operating budget.

Many condominium associations already struggle to meet today’s reserve requirements.

As these standards become more stringent, additional California condominium projects may lose eligibility for conventional financing.

How These Changes Affect California REALTORS®

California has one of the nation’s largest condominium markets, making these lending changes especially significant.

For listing agents, financing eligibility should become part of every listing consultation.

Questions worth asking include:

• Does the HOA have adequate reserves?
• Is there pending litigation?
• Are there special assessments?
• Has the building experienced structural issues?
• Is the HOA financially healthy?
• Does the project qualify for conventional financing?

Identifying potential issues before the property goes on the market allows agents to develop the right financing strategy from day one.

Specialized California Non-Warrantable Condo Financing

Not every lender understands condominium financing.

As a mortgage professional specializing in California non-warrantable condo financing, I help REALTORS® and their clients secure financing for projects that many traditional lenders decline.

I regularly assist with financing for condominium communities experiencing:

• HOA litigation
• SB-800 construction defect claims
• Reserve deficiencies
• Insurance challenges
• Deferred maintenance
• Structural review requirements
• Fannie Mae ineligible projects

My goal is simple: identify financing solutions before they become transaction-ending problems.

Bottom Line

Condominium financing has changed dramatically.

The combination of stricter Fannie Mae guidelines, increased reserve requirements, and expanded project reviews means REALTORS® must be more proactive than ever.

Before listing a condominium or submitting an offer, verify the project’s financing eligibility.

Doing so can help reduce escrow cancellations, improve buyer confidence, and keep more transactions on schedule.

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Need Help With California Non-Warrantable Condo Financing?

If you have a listing that may not qualify for conventional financing—or you simply want to verify a project’s eligibility before going to market—I’m happy to help.

I specialize in financing California condominium projects that many lenders consider non-warrantable, including communities with litigation, reserve shortages, insurance issues, and other HOA-related challenges.  I have successfully closed over 800 loans on Fannie Mae ineligible condos and can assist you with getting your transaction completed.

Let’s determine your financing options before your transaction is at risk.