Condo Approval

When using conventional financing to purchase a condo, we’ll need to review the condo and verify it meets Fannie Mae and Freddie Mac’s guidelines. Depending on the down payment, residency, and type of condo, the condo review may be a 2-4 Unit Review(, a Limited Review, or a Full Review. Here are the types of loans that qualify for a limited review. If the loan does not qualify for a 2-4 Unit Review or Limited Review, then we’ll have to complete a Full Review instead.


These are the types of transactions that always require a Full Review:

  1. Primary Residence with less than 10% down payment
  2. Second Home or Investment property with less than 25% down payment
  3. Condo is still under construction or incomplete
  4. Developer is still in control of the homeowner’s association
  5. Condo is subject to additional phases or annexation


Here are the typical documents we need to complete a Full Review on a condo:

  1. Questionnaire dated within the last 60 days. This includes verification that the condo does not have any deferred maintenance. If there is any deferred maintenance that is a safety concern, we’ll need additional information and documents to verify it’s sufficiently being addressed.
  2. Master Insurance policy. (See this link for more info on the insurance requirements.)
  3. Current Approved Budget. At least 10% of the annual budgeted common assessments must be allocated to reserves. (Note: This is not required on a limited review)


If applicable, we’ll also need the following items:

  1. If the property was converted in the last 3 years, we’ll need the Architect’s or Engineer’s Report
  2. If there are any pending or current special assessments:
    1. Year to Date Profit and Loss statement
    2. Balance Sheet dated with in the last 60 days
  3. If there is any pending or current litigation:
    1. All filed legal complaints
    2. Signed status letter for all litigation dated with in the last 60 days verifying the extent of the liability that the association will endure with the suit.
  4. Copy of any leasehold agreement
  5. If there is any deferred maintenance:
    1. Reserve Study
    2. Year to Date Profit and Loss statement
    3. Balance Sheet dated with in the last 60 days
    4. Condo management to verify the maintenance required and the timetable to complete it
    5. Latest meeting minutes

Below are some other major issues we find on some condos when completing a Full Review:

  1. More than 15% of the unit owners may be over 60 days past due on their condominium fees.  (Note: this is not verified on a limited review.)
  2. More than 35% of the square footage in a condominium may be dedicated to commercial use.
  3. More than 6 months of past due condominium fees due from the mortgage company in the event of a foreclosure
  4. Investor ratio exceeds the limit. If a buyer is an owner occupant, we do not care about the investor ratio.  The investor ratio is the percentage of units owned by investors rather than owner occupants who live in their unit.  But if the buyer is an investor, and the project consists of 5 or more units, then no more than 51% of the units can be owned by investors.
  5. Inadequate insurance –there are several types of coverages required.  See this link for more info on the insurance requirements.
  6. A single entity (an individual, investor group, partnership, or corporation) owns more than the allowed number of units:
    • projects with 5 to 20 units – 2 units
    • projects with 21 or more units:
      • Fannie Mae: more than 20% of the units in the project
      • Freddie Mac: more than to 25% of the units in the project

*These single entity limits can be superseded in the following scenario:

    • If the single entity owns up to 49% of the units in a condo (but not more)
    • Pays their dues on time
    • The project does not have pending special assessments
    • The entity owner is selling one of their many units to a purchaser
    • The entity owner is actively working to market their units with a goal of reducing their ownership to 20% of units or less
      • FYI: In some cases, even if a non-profit owns multiple units, if these units are owned for the purpose of providing affordable housing then their single entity ownership is not an issue.


Please note for Fannie Mae, they may make an exception for one of the above rules is not met (other than insurance).  In my personal experience we haven’t been able to get approvals from Fannie Mae with more than one exception requested. The exception request is done through the CVAS Waiver process and it can be submitted to Fannie Mae once all condominium related docs are in.  It’ll take Fannie Mae about a week to review, and they may ask for additional documentation or explanations from the association.


Freddie Mac also has an exception process, called the Condo Project Advisor.  Noteworthy with Freddie Mac exceptions is that they may consider multiple exceptions on one project.


If a condo is approved by either Fannie Mae or Freddie Mac, it is considered warrantable.  If a condo cannot be approved for sale to Fannie Mae or Freddie Mac, then there may be an opportunity to get financing through a non-warrantable condo loan.  This would be a portfolio loan program with greater down payment requirements and higher interest rates.

The approval rules ease significantly for 2-4 unit condos so please read that link if necessary.

Want to check if the condo is FHA approved or VA approved? See these links to check.  Also, if a condo is FHA approved and was approved through the HRAP method (meaning FHA approved it internally), then it’s eligible for conventional financing.

We also handle submissions to FHA and VA for their approvals:

FHA Condo Approval Website

VA Condo Approval Website

Here is a link to my webpage with the library of information about condominiums.

Questions? or 240 479 7658

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