A buyer loves your unit, offers a fair price, and gets pre-approved. Then, three weeks into the deal, the lender says the loan can't go forward. Nothing is wrong with the buyer or the unit. The problem is the condo association.

That scenario is becoming more common. In March 2026, Fannie Mae and Freddie Mac rewrote their rules for lending on condominiums, and the changes are rolling in through early 2027. If you own, sell, or plan to buy a condo in Beverly, Salem, Danvers, Peabody, Swampscott, or anywhere on the North Shore, here is what changed and what to do about it.

What changed, and when

Fannie Mae announced the changes in Lender Letter LL-2026-03 on March 18, 2026, and Freddie Mac issued matching updates the same day in Bulletin 2026-C. Because the two agencies moved together, the rules apply to nearly every conventional condo loan. The key dates are tied to the loan application date:

Note: some lenders and programs set these deadlines by rate-lock date instead of application date. MassHousing, for example, applies them by lock date. Your lender will confirm which date controls your loan.

Why the end of Limited Review matters most

For years, buyers with at least 10% down on a primary home, or 25% down on a second home, could often get by with a Limited Review of the association. The lender confirmed a few basics and moved on. That shortcut is gone. Now the lender typically collects a condo questionnaire and reviews the budget, reserves, insurance, and any litigation or critical repairs. Associations that never had to answer those questions are answering them now, often in the middle of a sale.

Why the 15% reserve rule is a winter-listing issue

The 15% minimum doesn't apply yet, but it's close. If you list this winter, your buyer's loan application could easily land after January 4, 2027. An association funding reserves at 10% or 12% passes today and may not pass then.

There is another path. The 15% test doesn't apply if the association has a professional reserve study done or updated within the last three years and budgets the study's highest recommended contribution. A study that only aims to keep the reserve account above zero, known as baseline funding, doesn't qualify.

Some rules actually got easier

Not every change tightens things. A few help North Shore owners, especially in the small associations that are common in our older housing stock:

• Small projects can skip the project review. Associations with 10 or fewer units can generally be exempt from review, up from 4 units before. Projects of 5 to 10 units can't be part of a master association. That covers many converted two-families, three-deckers, and small buildings in Beverly, Salem, Lynn, and Gloucester.
• Fannie Mae dropped its 50% investor-ownership limit. Buildings with a lot of rented units are no longer automatically a problem under that test. Individual lenders and programs can still set their own limits, though.
• Insurance documentation is more flexible. The inflation-guard requirement is gone, and associations have more accepted ways to show their coverage is adequate.

What is a non-warrantable condo?

A non-warrantable condo is a unit in a project that doesn't meet Fannie Mae or Freddie Mac standards. The unit itself can be in perfect shape. Buyers can still purchase it, but not with a standard conventional loan. They typically need a portfolio or non-QM loan from a lender that keeps the loan on its own books. Those loans often come with a larger down payment, a higher interest rate, or both, or the buyer needs to pay cash.

For a seller, that means fewer qualified buyers. Every buyer who can't finance your unit is one less offer.

Common reasons a project ends up non-warrantable include:

• Reserves below the required minimum, with no qualifying reserve study
• A master policy deductible above the new $50,000 per-unit cap, or coverage below replacement cost
• Significant deferred maintenance or unaddressed critical repairs
• Pending litigation involving the association
• Too many owners behind on their condo fees
• Too much of the building owned by one person or entity, or too much commercial space

The Massachusetts angle

Massachusetts condo law, M.G.L. Chapter 183A, requires every association to maintain an "adequate" replacement reserve fund held separately from operating money. But the law doesn't define "adequate," doesn't set a percentage, and doesn't require a reserve study.

That gap matters now. A small, self-managed association in a Marblehead or Swampscott conversion can be fully compliant with state law and still fall short of what a Fannie Mae or Freddie Mac lender requires. Plenty of small associations have never commissioned a reserve study, and some set their reserve contribution years ago without revisiting it.

One more local note: the 6(d) certificate required at closing confirms that the seller's condo fees are paid up. It says nothing about whether the project meets lender standards. A clean 6(d) doesn't mean your buyer's loan will clear.

Frequently asked questions

Why can't my buyer get a loan on my condo?

The most common reason is that the condo project, not the buyer or the unit, doesn't meet Fannie Mae or Freddie Mac standards. Typical problems are low reserves, a master insurance deductible that's too high, pending litigation, too many owners behind on fees, or critical repairs. Since August 3, 2026, more buyers' lenders have to complete a full project review, so these issues surface more often.

What is a non-warrantable condo?

It's a condo in a project that doesn't meet Fannie Mae or Freddie Mac eligibility standards. Buyers can't use a standard conventional loan and usually need a portfolio or non-QM loan, a larger down payment, or cash.

Is the new 15% reserve requirement in effect now?

Not yet. It applies to loan applications dated on or after January 4, 2027. Until then, the minimum is 10% of the association's annual budgeted assessment income. An association with a current reserve study, budgeted at the study's highest recommended level, can qualify without meeting the percentage test.

Does Massachusetts require condo associations to have a reserve study?

No. M.G.L. Chapter 183A requires an adequate replacement reserve fund but doesn't define "adequate" or require a reserve study. Lender standards are stricter than state law, so a compliant association can still fail a lender's review.

Do the new rules apply to small condo associations?

Projects with 10 or fewer units can generally be exempt from the project review, as long as projects of 5 to 10 units aren't part of a master association. The unit-level insurance rules, including the HO-6 requirements, still apply.

Do these changes affect FHA or VA loans?

These are Fannie Mae and Freddie Mac rules for conventional loans. FHA and VA have their own condo approval processes, so a project can be approved for one type of loan and not another. Ask your lender which loan types a specific project qualifies for.

Related reading: Do Massachusetts Sellers Have to Disclose Problems? · North Shore Market Update: October 2026