Condo financing · Northern Michigan

With a condo, the building has to qualify too.

Share of an association’s yearly assessment income budgeted for reserves, in a Fannie Mae or Freddie Mac full project review.

Fannie Mae and Freddie Mac rewrote how lenders review condo buildings in 2026. One change took effect on August 3, 2026. The next arrives January 4, 2027, and it is measured on the association’s budget, not on the buyer. This page is what the new guidelines say, in plain English.

Have Michele check a building See what changed

Michele Fulcher

Mortgage Loan Originator · NMLS #139088

40 years in lending

40 years in lending Career mortgage banker

NMLS #139088 Verified on NMLS Consumer Access

Thousands of loans closed Who’s Who nominee, two years running

Former company owner President, A.S. Financial Corporation

What changed

Three dates. One of them is still ahead of you.

A condo loan has two approvals inside it. One is yours. The other belongs to the building: its budget, its insurance, its condition, how it is run. The 2026 changes are about the second one.

March 18, 2026 Announced

Both agencies publish the changes.

Fannie Mae and Freddie Mac buy conventional mortgages from lenders, so their rules decide which condo buildings those loans can be written in. They issued the same set of changes on the same day.
August 3, 2026 In force now

The shorter review goes away.

For years, many condo loans went through a shorter building review that never opened the association’s budget. For loan applications dated on or after August 3, 2026, that review is gone. Most conventional loans on attached condos in projects of more than 10 units now get the full review, and the full review reads the budget.
January 4, 2027 Coming

The reserve mark moves from 10 to 15 percent.

The full review checks how much of the association’s yearly dues income is budgeted for replacement reserves: the money set aside for roofs, paving, siding and everything else that wears out. The minimum is 10 percent today. For loan applications dated on or after January 4, 2027, it is 15 percent.

The measurement

One line in the budget, against a mark that is about to move.

Take what the association budgets for replacement reserves this year. Divide it by what it budgets to collect in regular assessments. That percentage is what a lender compares to the mark.

It is the yearly budget line, not the balance. A building with a healthy reserve account and a thin budget line can still miss it.
A special assessment does not count toward it. The mark has to be met in the regular budget.
Michigan’s own rule measures something else. State rules require an association to keep a reserve fund of at least 10 percent of its current annual budget. A building can meet that and still fall short of the lender’s test.

Run your building’s number.

Both figures are on the association’s annual budget. The example is a 40-unit building at $500 a month. Type over it with yours.

This budget puts 10.0 percent toward reserves.

It meets today’s 10 percent mark. Reaching 15 percent by raising assessments would take about $14,118 more a year, or about $30 per unit per month.

An estimate using Fannie Mae’s published formula, taken up to the next dollar. It assumes the increase is paid for by raising assessments, which also raises the income the percentage is measured against. A lender may leave certain items out of the income figure, which can only raise the percentage, so treat this as the most a building would need. This is not a project approval, and nothing you type here is sent anywhere.

Before anything else

Does your building get the full review at all?

Plenty of condos up here do not. The review is waived by the size and type of the project, and the reserve test only comes with the review. Two questions settle most of it: how many units, and are they attached.

Usually skips the review

Detached condos, including site condominiums, where the home stands alone on a condo-form lot
Projects of two to four units
Projects of five to 10 units that are not part of a master association or larger development

Gets the full review

Attached units in projects of 11 or more
Projects of five to 10 units that sit inside a master association
Attached units in new or newly converted projects

Skipping the review is not a free pass. The building still has to carry the required insurance, still cannot operate as a condo hotel, and still cannot be one Fannie Mae has flagged as unavailable.

For a building in the review

There are two ways to meet it, not one.

The percentage

Budget 15 percent for reserves.

The association’s annual budget puts at least 15 percent of its assessment income toward replacement reserves. In the example building, reaching it by raising assessments takes about $30 more per unit each month.

The study

Fund what a reserve study recommends.

A reserve study completed within the last 3 years by an independent professional can stand in for the percentage, if the budget funds the highest amount the study recommends. Since August 3, 2026, a study built on baseline funding, where the balance is allowed to run down toward zero, no longer qualifies.

A flat 15 percent is not automatically the right number for a particular building. Some need more and some need less, and the reserve study is the tool that answers it. Which route to take is the board’s decision, made with its manager, its accountant and its attorney.

What to do about it

It depends which side of the building you are on.

Buying a condo

Find out about the building before you fall for the unit.

Ask how many units are in the project and whether yours is attached or detached. That answers most of whether the full review applies.
Ask the listing agent for the association’s current budget and its most recent reserve study, if it has one. A lender will ask for both anyway.
If the building clears 10 percent but not 15, the date on your loan application matters. The 15 percent mark applies to applications dated on or after January 4, 2027.
Send Michele the name of the project before you write the offer. She will tell you which review it gets and what the lender will need from the association.

Own one, or selling one

Your buyer’s loan depends on a budget you did not write.

Ask your board or manager two things: what percent of assessment income is budgeted for reserves next year, and whether there is a reserve study from the last 3 years.
If the building does not meet the standard, a buyer generally cannot use a conventional loan sold to Fannie Mae or Freddie Mac until it does. FHA, VA and other loans have their own rules, and some buyers will fit those and some will not.
Listing soon? Have the budget, the reserve study and the master insurance certificate in hand before the first showing.
A refinance of your own unit can run through the same building review, depending on the loan, so this is your question too, not only a seller’s.

On a board, or managing one

The budget you adopt next is the one lenders will read.

Run the number: the budgeted reserve contribution divided by budgeted assessment income. If your fiscal year starts in January, that budget is being drafted now.
Under 15 percent, there are two routes. Raise the line, or get a reserve study and fund the highest amount it recommends.
Expect more lender questionnaires, and answer them completely. When a lender cannot get the budget and reserve information, the loan cannot go ahead as a Fannie Mae or Freddie Mac loan.
Michele will walk your board through it, in person or on a call, at no charge. She is a lender, not your attorney or your reserve specialist, and she will say where their advice is the one you need.

Listing or showing condos

Know which review the building gets before the listing goes live.

Unit count, attached or detached, and whether there is a master association. Those three facts sort most buildings in a minute.
Collect the budget, the reserve study, the master insurance certificate and the manager’s contact up front. It is the same packet every buyer’s lender will request.
A buyer in a building that sits between 10 and 15 percent has a real reason to care about timing. The higher mark applies to applications dated on or after January 4, 2027.
Send Michele the building. She would rather walk you through its review this week than have your buyer learn about it in underwriting.

If the building misses the mark

It is a different loan or a fixable budget. It is not a dead end.

A loan in a building that misses cannot be sold to Fannie Mae or Freddie Mac until the building qualifies. That closes one door, and it is the widest one, but it is not the only one.

Fix it at the association: The test is on the budget, and when the budget changes, the answer changes. A building that misses the mark this year is not marked for good.
FHA: FHA approves condo buildings through its own process and uses its own reserve standard, currently 10 percent. In some cases a single unit can be approved in a building that is not on the approved list.
VA: A VA loan needs the building to be VA-approved. For an eligible veteran in an approved building, the conventional reserve test is not the question.
Loans that are not sold to either agency: Often called non-warrantable condo loans. They exist for buildings that do not fit the conventional rules, and the terms vary by lender.

A note on resort and rental-heavy buildings.

The March 2026 changes did not touch the condo-hotel rules, and those still matter around the bays and the ski hills. A building whose association runs a rental desk, shares rental revenue, or is marketed as a resort is treated differently from one where owners rent out their own units. An owner listing a unit on a vacation site does not, by itself, make a building ineligible. What counts is the association’s own role, and whether the building as a whole is used mainly for stays of under 30 days.

For boards and managers

Two pages for your next board meeting.

The Board Briefing puts the dates, the measurement, the two ways to meet it, and a worksheet for your own budget on one sheet of paper, front and back. No email required. Forward it to the rest of the board.

Download the Board Briefing Ask Michele to present it to your board

In the example building, getting from 10 to 15 percent takes about $30 a month per unit.

40 units at $500 a month is $240,000 a year in assessments, with $24,000 of it budgeted for reserves. Raising assessments by about $14,118 a year brings the reserve line to 15 percent of the new total. An illustration, not a recommendation for any building.

Start here

Send Michele the building.

The name of the project, the town, and what you are trying to do. She will tell you which review it gets and what its budget needs to show. No application, no credit check, no charge.

Already buying

If you are under contract on a condo, do not leave this for December.

The 15 percent mark applies to loan applications dated on or after January 4, 2027. In a building that sits between 10 and 15 percent, timing is worth a conversation now.

Start your application Talk to Michele first

An earlier application date changes which mark your own loan is measured against. It does not change the building, and whoever buys from you later will be measured against the mark in force then.

Opens the secure Priority Home Mortgage application in a new tab. Michele Fulcher, NMLS #139088. Equal Housing Lender.

Condo questions

The questions people are asking about this.

Short answers. The agencies’ own documents are linked at the foot of the page.

What is the new 15 percent condo reserve requirement?

Fannie Mae and Freddie Mac are raising the minimum a condo association must budget for replacement reserves from 10 percent to 15 percent of its annual budgeted assessment income. It applies when a lender does a full project review of the building, for loan applications dated on or after January 4, 2027. Both agencies announced it on March 18, 2026.

When does the 15 percent condo reserve requirement take effect?

For loan applications dated on or after January 4, 2027. It is keyed to the application date, not the closing date. Until then the minimum under a full project review remains 10 percent.

Does the 15 percent reserve rule apply to every condo?

No. It applies where the lender has to do a full project review, which mostly means attached units in projects of 11 or more. Detached condos, including site condominiums, and projects of two to four units generally skip the review. So do many projects of five to 10 units, unless they are part of a master association or larger development.

Is it 15 percent of the money in the reserve account?

No. The test looks at the yearly budget, not the balance. The lender divides what the association budgets for replacement reserves this year by what it budgets to collect in regular assessments. A building with a large reserve balance and a thin budget line can still miss the mark, and a special assessment does not count toward it.

What changed for condo loans on August 3, 2026?

Fannie Mae and Freddie Mac retired their shorter condo project reviews for loan applications dated on or after August 3, 2026. Those shorter reviews did not examine the association's budget. Most conventional loans on attached condos in projects of more than 10 units now get a full review, which does.

Can a reserve study take the place of the 15 percent requirement?

Yes. An association can qualify with a reserve study completed within the last 3 years by an independent professional, as long as its budget funds the highest amount the study recommends. Since August 3, 2026, a study that uses baseline funding, where the balance is allowed to run down toward zero, no longer qualifies.

Does Michigan law already require condo associations to keep reserves?

Yes, but it measures something different. Michigan’s condominium rules require an association to maintain a reserve fund of at least 10 percent of its current annual budget. The Fannie Mae and Freddie Mac test looks at how much the association budgets to add to reserves each year. A building can satisfy the state rule and still fall short of the lender’s test.

What happens if a condo building does not meet the reserve requirement?

A loan in that building is not eligible to be sold to Fannie Mae or Freddie Mac until the building qualifies. That can be fixed at the association, by raising the budget line or by funding a qualifying reserve study. In the meantime, FHA and VA loans have their own building approval rules, and some lenders offer loans that are not sold to either agency. Which one fits depends on the building and the borrower.

Do short-term rentals make a condo building ineligible?

Not by themselves. An owner renting a unit on a vacation site does not make a building ineligible on its own. What the agencies look at is the association’s role: whether the building is operated or marketed as a hotel or resort, runs a rental desk, shares rental revenue, or is primarily used for stays of less than 30 days. The March 2026 changes did not alter those condo-hotel rules.

Can Michele Fulcher tell me whether a specific condo building will qualify?

She can tell you which review a building gets, what the lender will ask the association for, and how the budget measures against the mark. Send her the name of the project and the town. The final decision on a building is made in underwriting on a specific loan, so what she gives you is a read on where it stands, not an approval.

Rules as of October 1, 2026. Sources:

This page explains mortgage eligibility rules in general terms. It is not legal, accounting or reserve-planning advice, and it is not a determination about any specific building. The agencies can change these rules. Michele Fulcher and Priority Home Mortgage are not affiliated with or endorsed by Fannie Mae, Freddie Mac, FHA or VA.

Buying a house rather than a condo? Start at buyupnorth.com.