Will your lender approve the condo? The building rules that can block a loan
When you finance a condo, the lender reviews the whole building, not just you. A building that doesn't meet its rules can delay the loan, change its terms or stop it, even when your credit is perfect. Most of what they check is in the HOA documents you already have.
Why the building matters
Most conventional mortgages are sold to Fannie Mae or Freddie Mac, so lenders follow their rules for condo projects. If the association is in trouble, owners are more likely to fall behind or face big assessments, and the loan is riskier. That's why lenders look at the building's finances, lawsuits and who owns the units.
What lenders check
These are from Fannie Mae's Selling Guide (topics B4-2.2-02 and B4-2.1-03) as of August 2026. Freddie Mac's rules are similar, and lenders can add their own.
- Reserves: at least 10% of the association's budget should go to replacement reserves. A recent reserve study can sometimes stand in for this.
- Owners behind on dues: no more than 15% of units can be 60 or more days late.
- One owner with many units: in buildings of 21 or more units, one person or company can own at most 20% of them; in smaller buildings, at most 2 units.
- Lawsuits: a building where the association is a party to a pending lawsuit is usually ineligible, unless the case is minor, such as a neighbor dispute or a claim the association's insurer is defending.
- Critical repairs: structural or safety problems, water intrusion, significant deferred maintenance, or unfunded repairs over $10,000 per unit due within a year can stop a loan until they're fixed.
- Commercial space: no more than 35% of the building's square footage.
- Hotel-style buildings: rental pools, daily rentals or hotel services make a building ineligible.
Special assessments don't automatically block a loan, but lenders look at what they pay for, especially if it's a critical repair.
When the review is skipped
Fannie Mae usually waives the building review for detached condo units, buildings of 2 to 4 units, buildings of 5 to 10 units that aren't part of a larger development, and homes in planned communities. Some rules, like the one on hotel-style buildings, still apply.
FHA and VA loans
FHA and VA loans have their own rules and approval lists, and FHA is generally stricter about things like owner occupancy and how many units one owner holds. You can look a building up on HUD's list of FHA-approved condos and the VA condo report.
How to check early
- Read the board minutes for lawsuits, big repairs and special assessments.
- Check the budget's reserve contribution and the reserve study.
- Ask your loan officer to order the condo questionnaire early. It's where lenders get delinquency and ownership figures the documents often don't include.
- Upload your documents to HOA Fine Print: every report includes a loan check against these rules, with the page each issue comes from.
This guide is general information, not lending advice. Agency rules change, and lenders can be stricter; your loan officer makes the call on your loan.