The big idea
Two approvals, not one
Every mortgage requires the borrower to qualify. A condo mortgage usually also requires the project to qualify. The lender reviews the condominium as a whole, often through a questionnaire completed by the association or its management company, and decides whether the building meets the standards of the loan program you are using.
That second review is why two units with the same price and floor plan can lead to very different financing outcomes. One building may be eligible for conventional, FHA, and VA financing. The building next door may be limited to specialized programs with larger down payments, or may not be financeable at all until a repair or legal issue is resolved.
The practical lesson: evaluate the building before you fall in love with the view.
Inside the review
What lenders look at in a building
Each loan program sets its own project standards. Fannie Mae’s guidelines are a useful example because so many conventional loans follow them. Under Fannie Mae’s current Selling Guide, a project can be ineligible or need closer review when:
- Too much commercial space
Nonresidential space generally may not exceed 35% of the project’s total square footage.
- Concentrated ownership
In projects with 21 or more units, a single entity generally may not own more than 20% of the units, with limited exceptions.
- Owners behind on dues
In a full project review, no more than 15% of units may be 60 or more days delinquent on association assessments.
- Thin reserves
The budget generally needs to allocate at least 10% of assessment income to replacement reserves, rising to 15% for loan applications dated on or after January 4, 2027. A lender can instead rely on an independent reserve study completed within the past three years, if the budget funds the study’s recommendations.
- Critical repairs or failed inspections
Material deficiencies, significant water intrusion, advanced deterioration, failed mandatory structural or safety inspections, or large unfunded repairs due within 12 months can make a project ineligible until they are remediated.
- Litigation
Pending lawsuits involving the association can make a project ineligible, though some minor matters may be acceptable.
- Hotel-style operation
Projects run like hotels, with mandatory rental pools or hotel-type services, are generally ineligible for standard conventional financing.
For investment-property purchases in established projects, Fannie Mae also generally looks for at least half of the units to be owned as primary residences or second homes. FHA, VA, and other investors apply their own versions of these tests.
Florida focus
Florida’s condo safety laws and why they reach your loan
Since 2022, Florida has added structural safety and reserve requirements for condominium associations. Two are especially relevant to buyers and lenders.
Milestone inspections
Condominium buildings three habitable stories or more in height must complete a milestone structural inspection by December 31 of the year the building reaches 30 years of age, and then every 10 years. Local building officials may move the first inspection up to 25 years based on local conditions, such as proximity to salt water. The inspection is performed by a licensed architect or engineer and can identify repairs the association needs to make.
Structural integrity reserve studies
Associations for buildings three habitable stories or higher must have a structural integrity reserve study, often called a SIRS, updated at least every 10 years. It covers major components including the roof, structure, floors, foundation, fireproofing and fire protection, plumbing, electrical systems, waterproofing and exterior painting, and windows and exterior doors. It estimates their remaining life and replacement cost, and sets a funding plan. The reserve schedule in the budget must be based on the most recent study, and waiving that funding is now allowed only in limited situations.
These requirements improve transparency, but they can also bring higher monthly dues or special assessments as buildings catch up on deferred work. Both affect your budget, and failed or unaddressed inspection findings can affect loan eligibility.
Due diligence
The documents you will receive on a resale
When you buy a condo from an existing owner, Florida Statute 718.503 requires the seller to provide current copies of key association documents at the seller’s expense, including:
- Declaration, articles, bylaws, and rules
These define what you own, what the association controls, pet and rental policies, and how decisions are made.
- Annual financial statement and budget
Shows dues, reserves, and how the association spends its money.
- Milestone inspection summary
If the building has had one.
- Structural integrity reserve study
The most recent study, or a statement that one has not been completed.
- Turnover inspection report
If one was performed on or after July 1, 2023.
- Frequently asked questions document
A short summary of key facts about the condominium.
Monthly cost
Insurance: the master policy and your HO-6
Condo insurance comes in two layers. The association’s master policy covers the building and common areas, and its cost is built into your dues. Your own unit policy, usually called an HO-6, typically covers interior finishes, personal property, and liability, depending on what the master policy leaves to owners.
Lenders review the master policy for adequate coverage and may require an HO-6 policy as a condition of the loan. In Florida, also look at the master policy’s windstorm deductible and whether the building is in a flood zone, because a large deductible or a coverage gap can lead to special assessments after a storm.
Matching the program
How loan type changes the review
- Conventional
Projects are reviewed against Fannie Mae or Freddie Mac standards. For loan applications dated on or after August 3, 2026, both agencies retired their lighter limited and streamlined reviews, so most projects now need a full review unless they qualify for a waiver. See conventional loans.
- FHA
The project generally needs to be on HUD’s list of FHA-approved condominiums. If it is not, FHA’s Single-Unit Approval may be an option for some units in completed projects with at least five units. See FHA loans.
- VA
VA maintains its own condominium approval process, so eligible veterans should confirm the project’s VA status early. See VA loans.
- Non-warrantable options
When a building does not meet agency standards, some portfolio and non-QM programs may still finance a unit, typically with different down payment, reserve, and pricing requirements.
If you plan to rent the unit, also read the association’s leasing rules. Minimum lease terms, rental caps, and approval requirements can shape both your investment plan and the lender’s view of the project.
Look closer
Red flags worth a closer look
None of these automatically rules out a purchase, but each deserves questions before you commit inspection and appraisal money:
- Very low reserves or a recently waived reserve contribution
May point to future assessments.
- Large special assessments, approved or proposed
Find out the purpose, the amount per unit, and the payment schedule.
- Inspection findings without a repair plan
Ask for board minutes that show how and when repairs will be funded.
- Pending litigation
Especially claims involving construction defects or structural issues.
- Rising delinquencies
When owners stop paying dues, the rest of the owners carry the cost.
- Hotel-style rentals
Short-term rental programs can push a building outside standard financing.