You found the condo. Right size, right location, no more snow to move or gutters to clean. You have good credit and a solid down payment.
And then your lender starts asking questions about the condominium association’s budget.
This is new, and it caught a lot of buyers off guard this year. Three things changed in 2026, and together they mean your loan approval now depends on the association’s finances almost as much as it depends on yours.
Here is what changed, what it means in West Michigan specifically, and what to look at before you write an offer.
Key Takeaways
As of August 3, 2026, Fannie Mae retired its Limited Review process, which means most conventional condo loans now require a Full Review of the association’s finances, insurance, documents, and litigation status.
The maximum allowable per-unit deductible on a condominium master property insurance policy is now $50,000, mandatory for loan applications dated on or after July 1, 2026.
Beginning with applications dated on or after January 4, 2027, associations will need to allocate 15% of annual budgeted assessment income to replacement reserves, up from 10%.
An association that is underfunded, underinsured, or missing current documentation can make a unit difficult to finance, regardless of how strong the buyer is.
Condominiums in Ottawa and Kent counties are already moving differently than the broader market. In June 2026, Ottawa County condos took 15 days to go pending against 9 days for the market overall, according to RPR data.
What actually changed for condo financing in 2026?
Three Fannie Mae policy changes took effect during 2026, and the most consequential is the retirement of the Limited Review process on August 3, 2026.
Under the old system, a condo purchase with a large enough down payment could often qualify for a Limited Review, which meant the lender looked at relatively few questions about the association itself. That path is gone. Freddie Mac retired its equivalent Streamlined Review at the same time.
What replaces it is the Full Review, which examines the association’s budget, reserve funding, insurance coverage, owner-occupancy ratios, delinquent assessments, pending litigation, and governing documents.
The practical effect: questions that used to apply to some condo purchases now apply to most of them.
Two other changes matter:
Insurance deductibles. Fannie Mae now caps the maximum allowable per-unit deductible for required property perils under a master policy at $50,000. This became mandatory for loan applications dated on or after July 1, 2026. Separately, a buyer’s individual HO-6 policy deductible cannot exceed the greater of 5% of the policy’s coverage amount or $2,500.
Reserve funding. The required replacement reserve allocation rises from 10% to 15% of annual budgeted income from assessments. Lenders must comply for applications dated on or after January 4, 2027, so associations have some runway, but budgets being set this fall are the ones that will be reviewed.
One change went the other direction. Fannie Mae expanded eligibility for a Waiver of Project Review to include new and established projects with ten or fewer units, which helps buyers looking at very small associations.
Why does the association’s budget affect my mortgage?
Because in a condominium you are buying into shared financial responsibility, and the lender is evaluating whether that shared structure can absorb a large expense without you defaulting.
If the roof on your building fails and the association has no reserves, the cost does not disappear. It arrives as a special assessment, split among the owners. That could be a few thousand dollars. In a building with deferred major systems it can be considerably more.
A lender looking at a thinly funded association is looking at the odds that its borrower gets a five-figure bill they did not plan for.
That is the logic behind the reserve requirements, and it is also why the questions have gotten more specific. The lender is not being difficult. It is asking whether the building’s finances are strong enough that your loan is a reasonable risk.
What does Michigan law already require?
Michigan already requires condominium associations to maintain reserve funds, and a pending bill would add a requirement for periodic reserve studies.
Under MCL 559.205, Michigan condominium associations are required to maintain a reserve fund for major repairs and replacement of common elements. That has been on the books for some time.
What Michigan does not currently require is a reserve study, which is the professional analysis that determines how much an association should actually be setting aside based on the age and condition of its components. House Bill 5019 would require periodic reserve studies for associations above certain thresholds, reported as budgets over $20,000 or more than 20 units.
The gap matters. An association can technically have a reserve fund and still be badly underfunded relative to what its buildings will need, because nobody has done the analysis to find out.
For a buyer, that means the existence of a reserve fund is not the question. The size of it relative to the building’s actual needs is the question.
Are condos actually selling differently in West Michigan?
Yes. As of June 2026, condominiums in both Ottawa and Kent counties took longer to go pending, sold slightly below asking, and carried more months of supply than the broader market.
This is worth looking at directly, because it is local and it is measurable.
In June 2026, according to RPR data:
Ottawa County condominiums carried 2.56 months of supply against 1.91 months for the market including single family. Condos went pending in a median of 15 days against 9 days overall. Condos sold at 98.7% of list price while the combined market sold at 100.3%.
Kent County condominiums carried 1.75 months of supply against 1.47 months combined. Condos went pending in 12 days against 7 days overall, and sold at 99.1% of list against 101.5% combined.
The pattern is consistent. Condos take roughly 70% longer to go under contract in both counties, and they are the only segment selling below asking.
The two counties are moving in opposite directions, though. Ottawa County condo supply grew 12.8% over twelve months while the combined market moved 1.6%. Kent County condo supply fell 11.6% while the combined market moved 0.7%.
A necessary caution. The financing changes landed in the same window as Ottawa’s softening, and it is fair to notice that. It is not fair to call it cause and effect. Condo performance also moves with association dues, insurance costs, buyer preference, new construction supply, and the specific reserve health of individual buildings. Two neighboring counties moving in opposite directions under identical national rules is itself evidence that the rules are not the whole story.
What you can reasonably conclude: condos are a slower, more negotiable segment in West Michigan right now than single family homes are, and buyers have more room than they did.
What should I check before making an offer on a condo?
Ask for the association’s budget, reserve balance, most recent reserve study if one exists, master insurance policy, and any record of pending litigation or planned special assessments.
Get these before you are emotionally committed, not during your inspection window when the clock is running.
The specific items worth understanding:
Reserve balance against the budget. How much is set aside, and what percentage of annual assessment income is being allocated to reserves. The 15% threshold arriving in January 2027 is a useful benchmark even now.
Whether a reserve study exists and when it was done. A study from 2013 on a building with a 2028 roof replacement is not telling you much.
The master policy deductible. With the $50,000 per-unit cap now in force, a higher deductible can create a financing problem.
Special assessments, current or contemplated. Board meeting minutes often reveal these before they are formally announced.
Owner-occupancy ratio and delinquencies. Both factor into the Full Review.
Any pending litigation. This can stop a conventional loan outright depending on the nature of the claim.
Your lender will request much of this. You want to see it earlier than that, because the answers may change whether you want the unit at all.
This is also worth saying plainly: condominium documents are legal documents, and reserve adequacy is a financial question. An attorney who reviews association documents and a lender who has actually closed condo loans in the past year are both worth having. This article explains the landscape. It is not a substitute for either of them.
Does this mean I should not buy a condo?
No. It means the diligence is different than it is for a single family home, and the difference is worth taking seriously.
Plenty of West Michigan associations are well run, well funded, and financed without difficulty. The changes in 2026 mostly make visible what was always true, which is that buying a condo means buying into someone else’s financial management.
The condos that will struggle are the ones that were already struggling. The buyers who will struggle are the ones who found out in week three of a thirty-day closing.
Look early. Ask specifically. Be willing to walk away from a beautiful unit in a badly run building.
FAQ
Why did Fannie Mae retire the Limited Review for condos?
Fannie Mae retired the Limited Review process effective for loan applications dated on or after August 3, 2026, consolidating condo project evaluation into the Full Review. The Full Review examines the association’s budget, reserves, insurance, owner-occupancy, delinquencies, litigation, and governing documents. Freddie Mac retired its equivalent Streamlined Review at the same time.
What are the 2026 Fannie Mae condo reserve requirements?
Fannie Mae is increasing the required replacement reserve allocation from 10% to 15% of an association’s annual budgeted income from assessments. Lenders must comply for loan applications dated on or after January 4, 2027. Associations setting budgets in late 2026 are setting the budgets that will be reviewed under the new threshold.
Can a condo association’s finances stop my mortgage?
Yes. Under a Full Review, insufficient reserves, an excessive master insurance deductible, high delinquency rates, unfavorable owner-occupancy ratios, or certain pending litigation can make a unit ineligible for conventional financing regardless of the buyer’s credit or down payment. The buyer’s strength does not offset the project’s condition.
Does Michigan require condo associations to have reserve studies?
Michigan requires condominium associations to maintain reserve funds under MCL 559.205, but does not currently require a professional reserve study. House Bill 5019 would add periodic reserve study requirements for associations above certain size thresholds. An association can therefore hold a reserve fund and still be significantly underfunded relative to its buildings’ actual needs.
Are condos harder to sell in West Michigan right now?
Condominiums are moving more slowly than the broader market in both counties. In June 2026, Ottawa County condos went pending in a median of 15 days against 9 days for the combined market, and sold at 98.7% of list price against 100.3%, according to RPR data. Ottawa County condo supply grew 12.8% over twelve months while Kent County condo supply fell 11.6%.
CTA
If a condo is on your list for the next chapter, the questions above are the ones worth answering before you fall in love with a floor plan.
And if you are looking at a specific building and want help reading what the association’s numbers are actually telling you, that is a conversation worth having early rather than during an inspection window with the clock running. Sometimes the answer is that the building is fine and you should move forward. Sometimes it is that the reserves do not support the age of the roof. Either way, you want to know before you are emotionally committed rather than after.