What Fannie Mae’s New Condo Rules Mean for Downtown KC Buyers and Sellers
By Casey Kempter, Nelson Home Group Realtor and KC Condo and Townhome Specialist
The Fannie Mae condo rules that took effect on August 3, 2026 change what it takes to finance a Kansas City condo. Fannie Mae and Freddie Mac retired the streamlined Limited Review and Streamlined Review processes, so an established building now has to clear a full review of its budget, reserves, and financial health before a buyer can get conventional financing. If you are buying or selling a downtown Kansas City condo right now, this changes what you need to have ready, and it changes how much cushion you should build into your down payment.
What Changed on August 3, 2026, and Why It Matters for Downtown KC Condos?
Until this month, a lot of condo loans skipped a deep financial review of the building entirely. If a buyer put enough down or had strong credit, lenders could use what was called a Limited Review (Fannie Mae) or Streamlined Review (Freddie Mac) and approve the loan without digging into the HOA’s budget, reserve fund, or delinquency rate.
Fannie Mae expanded its Waiver of Project Review to projects with ten or fewer units, which almost nothing downtown qualifies for.
That shortcut is gone. For loan applications dated on or after August 3, 2026, an established project has to go through a Full Review unless it qualifies for a Waiver of Project Review. Fannie Mae expanded waiver eligibility to projects with ten or fewer units, which is exactly why almost every downtown Kansas City building lands in Full Review. Unit counts here run well past ten. Full Review means the lender is looking at the association’s budget, reserve study, litigation history, insurance coverage, and financial condition, regardless of how much the buyer is putting down.
For downtown KC buildings, this is not a hypothetical. I work inside these buildings constantly, and the range in how well HOAs are run and funded is wide. Buildings that would have sailed through a Limited Review two months ago may now hit a snag if their reserves or paperwork are not in order.
How Does Limited Review Compare to Full Review?
| Limited Review (retired) | Full Review | |
|---|---|---|
| What the lender examines | The borrower file. The HOA budget, reserve study, and delinquency rate were skipped. | The association budget, reserve study, delinquency rate, insurance coverage, and litigation history. |
| What it turned on | The buyer down payment and credit profile. | The financial condition of the building, regardless of the down payment. |
| Which projects qualify | Established projects meeting the loan to value and occupancy tests. | Established projects, unless the project qualifies for a Waiver of Project Review, which Fannie Mae expanded to projects with ten or fewer units. |
| Status for applications dated on or after August 3, 2026 | Retired by both Fannie Mae and Freddie Mac. | The default path for almost every downtown Kansas City building. |
Free resource: Thinking through what a downtown KC condo actually costs each month, including HOA fees? Our Mortgage Calculator breaks down real payment scenarios so you can plan around this with actual numbers. Run your numbers here.
What Makes a Condo Building “Non-Warrantable” Under the New Rules?
A non-warrantable condo is not a reflection of your credit or your income. It is a reflection of the building.
Warrantability is a label attached to the building and its HOA, not to you as a buyer. Conventional lenders check a building against a specific set of criteria, and if it fails any one of them, every unit in that building can lose access to standard Fannie Mae and Freddie Mac financing. I walked through several of these criteria in more detail in the worst condo buying mistakes I see.
The building-level factors that can trigger non-warrantable status include:
High investor ownership, where too many units are rented instead of owner-occupied. Single-entity ownership, where one person or company owns more than the allowed share. Fannie Mae caps that at two units in projects of 5 to 20 units, and at 20 percent of the units in projects of 21 or more, so a downtown tower is working against the 20 percent number. Active litigation involving the HOA. Short-term or daily rentals that make the building function like a hotel. Commercial space that exceeds 35 percent of the building’s total square footage. Weak reserves or a high rate of unpaid HOA dues. And incomplete construction, where the project is still developer-controlled.
Any one of these can push a building out of warrantable status, which limits buyers to cash purchases or non-QM financing with less favorable terms. That risk existed before August 3. What changed is that Full Review now catches it on nearly every transaction instead of only some.
How Do Building Renovations Put Your Financing at Risk?
Here is the part most buyers and even some sellers do not think about: a building that is doing or planning a major renovation can deplete its reserves fast, even if the HOA is otherwise well run. A roof replacement, elevator modernization, or facade repair can pull a healthy reserve fund down to a level that trips the lender’s Full Review criteria.
Lenders read the reserve study alongside the balance, so a funded project reads very differently than a drained fund.
This is not a reason to avoid buildings that are investing in themselves. Deferred maintenance is a far bigger red flag than a building actively fixing things. But it does mean that timing matters more than it used to. A building mid-renovation when your loan application is dated could show weaker reserve numbers on paper than the same building six months later, once the project is funded and complete.
What Should Downtown KC Sellers Do Before Listing a Condo?
Order your resale documents and the HOA’s financial records before you list, not after you get an offer.
If you are selling a downtown KC condo, the single most useful thing you can do before listing is order the condo resale documents and the HOA’s current financial records. That package typically includes the budget, reserve fund balance, reserve study, delinquency rate, and any pending litigation or special assessments. If you want to know how to actually read what comes back, I broke down reserve funds and special assessments line by line in my guide to Kansas City condo HOA fees.
Getting this in hand before you list does two things. It lets you and your agent get ahead of anything that could slow down or derail a buyer’s Full Review, and it lets you set expectations with buyers up front instead of discovering a problem three weeks into a contract. A deal that falls apart at underwriting because of a reserve issue nobody checked costs everyone time, and in this market, time is not free.
What Should Downtown KC Buyers Do to Protect Their Financing?
Given how much more scrutiny every downtown building is facing right now, I am telling every buyer I work with to plan for at least 10 to 15 percent down, even on buildings that look financially solid on the surface. That cushion protects you if the building’s reserves come in under the threshold your lender needs to see, or if a Full Review surfaces something that pushes you toward a different financing path.
Boards that start funding toward 15 percent now will have an easier 2027 than boards that wait for the deadline.
It is also worth knowing that this is only going to get more demanding. For loan applications dated on or after January 4, 2027, Fannie Mae raises the minimum reserve allocation for capital expenditures and deferred maintenance from 10 percent to 15 percent of the association’s annual budgeted assessment income. Buildings that are not already moving toward that number will have less room to work with as that deadline approaches, which is one more reason to ask pointed questions about reserve funding before you write an offer, not after.
I can tell you from working in these buildings that reserve health varies a lot from property to property, and you cannot read it off the lobby. A well run association has a current reserve study, a funding level that actually tracks what that study recommends, a low delinquency rate, and a board that will talk plainly about what is coming in the next five years. An association that cannot produce those documents quickly is telling you something before you ever read a number. That is the kind of homework worth doing on any building you are considering, and it is the kind of homework I do before I ever recommend a building to a client.
Frequently Asked Questions
What is the difference between Limited Review and Full Review for condo loans?
Limited Review, and Freddie Mac’s equivalent Streamlined Review, let qualifying buyers get a condo loan without the lender examining the HOA’s full financial picture. Full Review requires the lender to examine the association’s budget, reserve study, delinquency rate, insurance, and litigation history before approving the loan. For loan applications dated on or after August 3, 2026, Limited Review and Streamlined Review are retired, so an established project goes through Full Review unless it qualifies for a Waiver of Project Review, which Fannie Mae expanded to projects with ten or fewer units.
What makes a condo non-warrantable?
A condo can become non-warrantable if the building has high investor ownership, if one entity owns more than the allowed share of units, which Fannie Mae sets at two units in projects of 5 to 20 units and 20 percent in projects of 21 or more, if the HOA is in active litigation, if the building allows short-term or daily rentals, if commercial space exceeds 35 percent of total square footage, if reserves are low or delinquency rates are high, or if the project is still developer-controlled. This status attaches to the building, not to an individual buyer’s credit or income.
How much reserve funding does an HOA need to keep a condo warrantable?
Currently, associations need to meet Fannie Mae and Freddie Mac reserve guidelines or align their budget with the highest recommended funding level in a formal reserve study. For loan applications dated on or after January 4, 2027, Fannie Mae raises the minimum reserve allocation for capital expenditures and deferred maintenance from 10 percent to 15 percent of the association’s annual budgeted assessment income.
How much should I put down on a downtown KC condo given these changes?
I am advising buyers to plan for at least 10 to 15 percent down as a cushion. A larger down payment does not exempt a building from Full Review, but it gives you more flexibility if the review surfaces a reserve shortfall or other issue that limits your financing options.
What should I do before listing my downtown KC condo for sale?
Order your condo resale documents and the HOA’s current financial records before you list. This includes the budget, reserve fund balance, reserve study, delinquency rate, and any pending special assessments or litigation. Knowing where your building stands before a buyer’s lender finds out lets you address issues early or set accurate expectations from the start.
Ready to Talk?
Whether you are buying or selling a downtown KC condo right now, these new lending rules make the details matter more than they used to. I can walk you through what a specific building’s financials look like and what that means for your financing before you write an offer or sign a listing agreement.
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