What Owners, Sellers and Buyers Should Know
A condo purchase requires two approvals: the buyer has to qualify for the loan, and so does the HOA. In the past, the HOA review was often fairly basic. New requirements took effect this year, and in most cases, an HOA now gets a much closer look, including its budget, reserves, insurance, unpaid dues and major building repairs. This means a buyer can be well qualified and still have an HOA financing problem. The changes are extensive. Below are the ones most likely to come up in a sale or a refinance.
More Review for Many Larger HOAs
In the past, most purchases qualified for a limited review of the HOA. That option has ended. HOAs with more than 10 units now go through a full review. If the HOA doesn't meet the new requirements, conventional financing is not available for units in that building. Buyers can still purchase with cash or with other loan products, which generally means higher rates, larger down payments and fewer lender options.
Smaller HOAs Now Qualify More Easily
The vetting landscape has moved in the opposite direction for smaller HOAs, which is meaningful in our market, where a large share of condo inventory sits in small projects. An HOA with 10 units or fewer can now qualify for a waiver of project review, which means the lender skips a detailed review. For an owner in a smaller HOA, the pool of buyers who can finance a purchase is larger than it was.
More Money Going Into Reserves
One of the biggest changes for larger HOAs involves reserves. There are two ways an HOA can satisfy the lender:
- Annual funding. For 2026, the budget must set aside at least 10% of regular HOA income for reserves. In 2027, that increases to 15%. If an HOA collects $1,000,000 a year in regular dues, at least $150,000 needs to be budgeted for reserves. Some income is excluded from that calculation, including special assessments and utility charges owners would normally pay themselves. An HOA that meets the percentage test will satisfy this part of the review. For most HOAs this is the simplest way to comply, but it may require increasing HOA dues.
- Already having the money. If the HOA is not setting aside the minimum amount described above, the lender can look at the HOA's reserve study instead. To qualify this way, the HOA has to already be funded at or above what its own reserve study recommends, and the budget has to fund the study's highest recommendation going forward. Most HOAs that fall short on annual funding will not meet that standard.
For most HOAs, the annual funding percentage is now the more practical path.
Insurance and the Master Policy Deductible
Lender guidelines for insurance have changed as well. We have seen our share of rising insurance costs here, with HOAs working to stay on budget by raising deductibles. That approach now has a limit. If the HOA master policy carries a per unit deductible above $50,000, it creates a loan approval problem. There is also a new requirement for individual owners, who must carry their own policy with coverage at least equal to any per unit deductible in the master policy.
Why Owners, Sellers and Buyers Should Care
For a buyer: Loan pre-approval tells you whether you are likely to qualify for the mortgage. It does not tell you whether every condo you consider will qualify. That is why we want the lender to look at the HOA early, particularly if there are questions about reserves, insurance, assessments or major repairs.
For a seller: The HOA's financing picture is worth understanding before an offer arrives. If a financing problem is not discovered until the property is under contract, the buyer may cancel. The listing returns to the market with days on market already accumulated, and momentum is lost, as the most productive period to market the property has been spent on a sale that could not close. Knowing where the HOA stands before listing can help steer clear of this outcome. If the HOA approval appears problematic, we can work in advance to locate lenders who are not applying these new rules. Those lenders exist, though their pricing is almost always higher than conventional financing.
For a condo owner who is not planning to sell: HOA decisions about finances, insurance and maintenance matter more than ever. How the HOA manages its money, insurance and major repairs can eventually affect the marketability of every unit in the building, as well as your ability to refinance.
We're happy to walk through any of this in more detail.
Your Trusted Advisors,
Peter and Tregg
Copyright © 2026 Peter Maurice and Tregg Rustad. All rights reserved. Unauthorized use, reproduction, or distribution of this content is prohibited.
