Condo Loan Rules 2026: What LA Buyers Must Check

Fannie Mae and Freddie Mac rewrote the condo loan rules in 2026. Most of it helps buyers. One piece bites soon: for loan applications dated on or after January 4, 2027, a condo HOA has to put at least 15% of its budget into reserves for your loan to clear the standard building review. If you are thinking about a condo in Los Angeles in the next year, the building now matters as much as the unit.

Not shopping yet? Perfect. This is exactly when to read this.

Send me a building you are curious about. I pull the HOA budget and the insurance, and tell you straight whether it is a building you can actually get a loan in. No obligation, no drip campaign. Ask me about a building →

Here is the deal. Everyone shops condos by the kitchen, the view and the parking spot. The lender shops the HOA. It reads the budget, the savings account, the insurance policy and the repair list, and if the building fails, your loan fails with it. Doesn’t matter how perfect the unit is.

I have been selling homes in Los Angeles for 15 years. I have watched buyers fall in love with a unit and lose it three weeks later over a building they never looked at. These new rules raise the stakes. So let’s go through them in plain English.

What changed in the condo loan rules in 2026?

Fannie Mae announced the changes in Lender Letter LL-2026-03 on March 18, 2026. Freddie Mac made matching changes the same day in Guide Bulletin 2026-C. These rules cover conventional loans. Here is the short version.

What changed	What it means for you	When
HOA reserves go from 10% to 15% of the budget	Underfunded buildings get harder to finance	Applications on or after Jan 4, 2027
Limited Review retired	Most established buildings now get the full review. More paperwork, more time	Applications on or after Aug 3, 2026
Building insurance deductible capped at $50,000 per unit	Your own condo policy (HO-6) has to cover your share	Applications on or after Jul 1, 2026
Buildings with 10 or fewer units can skip the building review	Small buildings are easier to finance	Now
Roofs no longer need replacement cost coverage	Cheaper premiums, but a smaller check if the roof goes	Now
The 50% investor limit is gone	A building full of renters no longer blocks your loan on that point alone	Now

Five of those six are good news. The reserve rule is the one to watch.

Why does the HOA’s savings account matter so much now?

Every HOA has two buckets of money. One pays the monthly bills. The other, the reserve fund, pays for the big stuff: roofs, elevators, plumbing, paint. Starting with applications on January 4, 2027, the building needs to be putting at least 15% of its yearly budget into that second bucket.

Real numbers. Say a 20 unit building charges $500 a month. That is $120,000 a year. Under the old rule it needed $12,000 a year going into reserves. Under the new rule it needs $18,000. That is $6,000 more a year, about $25 more per unit per month.

A building that comes in under 15% has one other way through. It needs a reserve study, and its budget has to fund the highest amount that study recommends. A study built on “baseline” funding, the method that lets the account drift down near zero, does not count.

What happens if a building fails? Conventional buyers get turned away. That leaves cash buyers and whatever other loan types still fit. Fewer buyers means softer prices when you go to sell. And a board that suddenly has to catch up tends to do it with a dues increase or a special assessment. Better you find that out before you sign than after.

Bottom line: a low HOA fee is not a deal if the building is skipping its savings. Cheap dues today can be a big check tomorrow.

What is the master insurance deductible, and why is it my problem?

The HOA carries one big insurance policy on the building. That policy has a deductible, and when there is a claim, many HOAs pass a piece of that deductible to the owners.

For loan applications on or after July 1, 2026, a per unit deductible on the building policy cannot be more than $50,000 per unit. When the building policy has a per unit deductible, or does not cover the improvements inside your unit, you need your own condo policy, called an HO-6. Your HO-6 coverage has to be at least the bigger of two numbers: what it costs to put your unit back the way it was, or the per unit deductible.

Your own HO-6 deductible also has a ceiling now. It can be no more than 5% of your coverage or $2,500, whichever is bigger.

Translation: before you write an offer, find out the building’s deductible and price the HO-6 policy that covers it. That number belongs in your monthly budget next to the mortgage and the dues.

Does the roof change save me money?

Maybe on the premium. Roofs still have to be insured, but they no longer have to be covered at full replacement cost. Actual cash value is now allowed, which means the policy pays what the roof is worth after wear and tear. Lower premium, smaller payout. If the building’s roof is old, that gap lands on the HOA, and eventually on the owners. Ask how old the roof is.

Are small condo buildings easier to buy now?

Yes, and this is a big one for the Eastside. Fannie Mae now lets lenders skip the full building review on projects with 10 or fewer units. Buildings with 5 to 10 units cannot be part of a larger master association to qualify. The building also cannot be flagged as ineligible and still has to meet the insurance rules.

Silver Lake, Echo Park, Highland Park and Los Feliz are full of small condo buildings and conversions. A lot of them used to be headaches to finance. Now many of them move a lot smoother.

One warning. Skipping the review means the lender is not looking hard at the building. It does not mean the building is healthy. You still read the budget. I still read the budget.

What happened to the “limited review”?

It is gone. For loan applications dated on or after August 3, 2026, established condo buildings that used to get the quick version now go through the full review, unless they qualify for the small building waiver above.

The full review means a longer HOA questionnaire, more documents and more back and forth with the management company. Management companies often charge for that paperwork and they do not always move fast. On a 30 day escrow, that is time you do not have. Start asking for documents the day you get in contract, not the week before closing.

Does this affect FHA and VA condo loans?

Not directly. These are Fannie Mae and Freddie Mac rules for conventional loans. FHA and VA run their own condo approval lists with their own rulebooks. If you are using an FHA or VA loan, the building needs to be approved for that program. Check that first, before you tour.

What should I check before I fall for a condo?

This is the list I work through for my buyers. Ask for these before you get attached.

The HOA budget. Find the reserve line and divide it by total income. Under 15% is a question you need answered.
The reserve study. How recent is it, and is the budget funding what it recommends?
The master insurance declarations page. What is the deductible, and what does the policy cover inside your unit?
Special assessments. Any in place, any being discussed? Read the last year of board minutes.
Critical repairs and deferred maintenance. Lenders now ask pointed questions about this. So should you.
Lawsuits. Is the HOA suing anyone, or being sued?
Dues history. Big jumps tell a story. So do dues that never move.
Your loan type. Conventional, FHA or VA. Make sure the building works for the one you are using.

What should I do first when buying a home in Los Angeles?

In this order. My home buyer’s guide walks through every step in more detail.

Talk to a lender. Get preapproved so you know your real number and your loan type. Loan questions are my preferred mortgage advisor’s lane, so I send people to Joe Tishkoff, a four decade veteran with Lower, LLC. Joe is an independent referral partner and is not employed by or affiliated with The Shelhamer Real Estate Group. You can use any lender you want.
Pick your agent before you tour. Buyers now sign a written agreement with their agent before touring a home, so choose the person you trust first. Ask how they get paid and read the agreement before you sign it.
Know your cash. The down payment is only part of it. Here is everything else you need at closing.
Shop buildings, not just units. Especially with condos. See the list above.

Why does a local agent matter here?

Because the listing photos will never show you the reserve fund. Any agent can open a door. You want the one who opens the HOA budget before you write an offer, knows which buildings in Downtown LA, Silver Lake and Echo Park have their act together, and tells you the truth when the answer is walk away.

I already own a condo. Should I worry about January?

Worth a look. If your building puts less than 15% into reserves, some future buyers using conventional loans may not be able to buy your unit. Ask your board two questions: what percentage of the budget goes to reserves, and when was the last reserve study done. If the answers are not good, the board has time to fix it now. If you are thinking about selling anyway, let’s talk about timing before the rule kicks in.

Quick answers

When does the 15% HOA reserve rule start?

For loan applications dated on or after January 4, 2027, under Fannie Mae’s full review. Freddie Mac made matching changes.

What is the maximum per unit deductible on an HOA master policy?

$50,000 per unit, for loan applications on or after July 1, 2026.

When did Fannie Mae retire the condo limited review?

For loan applications dated on or after August 3, 2026. Buildings now get a full review or qualify for a waiver.

Which condo buildings can skip the project review?

Buildings with 10 or fewer units. Buildings with 5 to 10 units cannot be part of a master association.

Can a condo roof be insured at actual cash value?

Yes. Roofs must be insured, but replacement cost coverage is no longer required.

Is there still a 50% investor limit for condo buildings?

No. Fannie Mae retired the investor concentration requirement.

Do these rules apply to FHA and VA loans?

No. FHA and VA have their own condo approval programs.

Condo shopping is not scary. Buying into a building you never checked is. Pick the building first, then pick the unit.

Sources: Fannie Mae Lender Letter LL-2026-03 (March 18, 2026) and Freddie Mac Guide Bulletin 2026-C (March 18, 2026). Loan rules change, and every lender applies them a little differently. Confirm the details for your loan with your lender. This article is general information, not legal, tax or lending advice.

New Condo Loan Rules for 2026: What LA Buyers Need to Check First