Fannie Mae and Freddie Mac’s updated mortgage eligibility requirements for condominiums are creating a new layer of friction in an already complicated buying process — and in Florida, where condos represent a substantial share of the housing market, the practical consequences are landing harder and faster than most buyers expect.
The changes, which have been phased in following the 2021 Surfside collapse and subsequent regulatory pressure on the Federal Housing Finance Agency (FHFA), require lenders to collect and review far more documentation about a condo building’s financial health, structural condition, and reserve funding before approving a loan. The intent is sound. The execution, for buyers in the middle of a transaction, can feel like the ground shifting beneath them.
What the Updated Rules Actually Require
Fannie Mae’s Condo Project Questionnaire and Freddie Mac’s parallel review processes now flag buildings on an expanded list of criteria. To be eligible for conventional financing, a condo association must generally meet all of the following conditions:
- Adequate reserve funding — typically at or above 10% of the annual budget, with lenders increasingly scrutinizing whether reserves are truly sufficient for a building’s age and maintenance profile
- No outstanding critical repairs — any documented structural, mechanical, or safety deficiencies can trigger an ineligibility determination
- No pending special assessments above a certain threshold — large one-time charges suggest deferred maintenance or reserve shortfalls
- Insurance compliance — the association must carry property, liability, and in many cases fidelity coverage that meets GSE minimums
- Owner-occupancy ratios — buildings that are too heavily investor-owned can fail eligibility, a longstanding rule that has become more strictly applied
The problem is not that these criteria are unreasonable. Most buyers would want to know this information. The problem is that gathering, verifying, and underwriting the documentation now takes considerably longer — and a building can fail the review for reasons entirely outside the buyer’s control.
Why Florida’s Condo Market Is Particularly Exposed
Florida has the highest concentration of aging condo inventory in the country. As of recent market data, roughly 60% of Florida’s condo stock was built before 1990, and a significant portion of that inventory is concentrated in South Florida, Tampa Bay, and along the Space Coast. Many of these associations have deferred maintenance over decades, carry underfunded reserves, or are actively working through the post-Surfside compliance requirements imposed by Florida’s SB 4-D legislation.
Florida’s aging condo stock post-Surfside created a compliance reckoning that was already straining HOA budgets before the GSE rule changes added another documentation layer on top. Now both state law and federal mortgage guidelines are converging on the same inventory — and the practical result is that more buildings are finding themselves on Fannie Mae’s restricted or ineligible list.
Industry observers have noted that lenders in Miami-Dade, Broward, and Palm Beach counties are encountering more declined condo project reviews than at any point in recent memory. In some cases, buyers arrive at closing with financing in place only to learn their specific unit’s building has been flagged during underwriting — a discovery that can kill a deal or push a buyer toward portfolio lending at significantly higher rates.
The Documentation Bottleneck
Part of the delay issue is structural. Lenders must obtain a completed questionnaire from the condo association, and associations — particularly those managed by small self-managed boards or overwhelmed property management companies — don’t always have the records organized or the bandwidth to respond quickly. A questionnaire request that should take five to seven business days can stretch to three or four weeks.
For buyers with rate locks, that delay has real dollar costs. At current mortgage rate levels, extending a rate lock is not free, and some borrowers are paying extension fees or watching their locked rate expire entirely while waiting on paperwork from an HOA office.
What Lenders and Buyers Are Doing in Response
Some lenders have shifted more condo buyers toward non-warrantable loan products — mortgages that don’t conform to Fannie and Freddie standards and are instead held on the lender’s balance sheet or sold to private investors. These loans carry higher interest rates, often 0.5% to 1.5% above comparable conventional rates, and typically require larger down payments.
AD Mortgage’s letter to the FHFA raised concerns about exactly this dynamic, arguing that overly rigid reserve thresholds were pushing creditworthy borrowers into more expensive financing for no safety-related reason — and that the collateral damage fell disproportionately on middle-income buyers purchasing in affordable condo buildings rather than luxury towers with well-funded associations.
The practical workaround for buyers who can afford it is to increase their down payment to a level that allows a portfolio lender to underwrite the loan comfortably. For buyers who cannot, the result is frequently a denied deal or a forced pivot to a different property.
Questions Buyers Should Ask Before Making an Offer
Before placing an offer on any Florida condo, these are the questions worth asking upfront — before spending money on inspections or appraisals:
- Is the building currently on Fannie Mae’s approved project list or restricted list?
- What percentage of the annual budget is currently held in reserves?
- Are there any pending special assessments, and what triggered them?
- Has the building completed its required Milestone Structural Inspection under Florida’s SB 4-D requirements?
- What is the current owner-occupancy ratio?
Getting these answers before going under contract is not pessimism. It is the basic due diligence that the new underwriting environment demands.
The Outlook for Florida Condo Buyers
The regulatory direction is not going to reverse. If anything, expect Fannie and Freddie to apply their condo eligibility criteria more consistently as enforcement catches up with the post-Surfside policy intent. Florida’s bipartisan condo safety legislation continues to move through the legislature, adding state-level requirements that will further sort buildings into “financeable” and “problematic” categories over the next several years.
For buyers, that creates both risk and opportunity. Buildings that have already completed milestone inspections, funded their reserves to adequate levels, and obtained clean structural certifications will carry a financing advantage. Buildings that haven’t will increasingly struggle to attract buyers who need conventional loans.
Work with your agent and your lender to run a condo eligibility check at the very beginning of any condo search — not after you’ve fallen in love with a unit. In today’s environment, the building’s financial and structural profile matters as much as the floor plan.