Quick Answer: Fannie Mae rolled out big changes to condo financing rules in 2026. The biggest one raises the required HOA reserve fund from 10% to 15% of the annual budget, starting with loans dated January 4, 2027. Lenders also dropped the "Limited Review" shortcut starting August 3, 2026, so most Scottsdale condo buildings now go through a full review. If you own or want to buy a condo here, these changes could affect your HOA dues, your closing timeline, or both.
What Changed in Fannie Mae's Condo Lending Rules for 2026?
Fannie Mae buys or guarantees a huge share of home loans in this country. When it changes its condo rules, lenders everywhere have to follow along. On March 18, 2026, Fannie Mae published Lender Letter LL-2026-03 (see below for link under "Sources"). It rewrote the playbook for how condo projects get approved for financing, and it updated the insurance rules HOAs have to follow, too.
Some of these changes help. A handful of them could bump up your HOA dues. A few small buildings actually get an easier path now. It's a mixed bag, and it depends a lot on the size and financial shape of your building.
For context, most of this traces back to the Surfside condo collapse in Florida back in 2021. That tragedy pushed Fannie Mae and Freddie Mac to start requiring engineering studies, reserve documentation, and closer looks at deferred maintenance before approving a condo loan. The 2026 update fine-tunes those rules based on a few years of real-world experience.
Freddie Mac released similar guidance around the same time, so these changes aren't limited to Fannie Mae loans alone. Together, the two agencies back a large share of conventional mortgages, which means most lenders you'll work with in Scottsdale will follow one version of these rules or the other.
Why Did Fannie Mae Get Rid of the Limited Review Process?
For years, buyers with a strong down payment (25% or more) could sometimes skip a chunk of paperwork through something called a "Limited Review." It let lenders approve a condo loan without collecting every single HOA document. That option is gone. Starting with loan applications dated August 3, 2026, every established condo project has to go through a Full Review, unless it qualifies for a different exception.
A Full Review means the lender collects the HOA's budget, insurance documents, reserve study, delinquency rates, and information about any lawsuits or planned repairs. It takes more time and more paperwork from the HOA board or property manager.
There is one bright spot. Fannie Mae expanded a separate option called the Waiver of Project Review. Small condo projects with ten or fewer units, including five- to ten-unit buildings that aren't part of a bigger master association, can skip most of the review altogether. If you're buying into a small boutique building in Old Town or South Scottsdale, this could actually make your loan process faster than it used to be.
How Will Higher HOA Reserve Requirements Affect Scottsdale Condo Owners?
This is the change getting the most attention, and for good reason. Fannie Mae raised the minimum reserve fund requirement for condo associations from 10% to 15% of the annual budget. A reserve fund is money an HOA sets aside for big repairs, like a new roof or repaving the parking garage, instead of borrowing or hitting owners with a surprise bill.
This higher requirement kicks in for loans that go through Full Review starting January 4, 2027. Fannie Mae also tightened how HOAs can use a reserve study (a professional estimate of future repair costs) to justify their reserve amount. Associations can no longer use a "baseline" funding method that lets the reserve balance dip close to zero. They now have to fund toward the study's highest recommended number.
For a lot of Scottsdale's older condo communities, especially ones built in the 1980s and 1990s around McCormick Ranch, Gainey Ranch, and Scottsdale Ranch, this could mean a real jump in monthly HOA dues or a special assessment (a one-time bill to cover a shortfall) to get reserves up to the new minimum. Newer resort-style buildings with fresh reserve studies, like the towers along the Camelback corridor, may already be closer to compliant.
If you're on an HOA board right now, this is worth getting ahead of. Talk to your management company about where your reserves stand and whether a fresh reserve study makes sense before 2027 rolls around.
A reserve study usually looks at every major component of the building, roofs, elevators, pool equipment, paving, and pipes, and estimates when each one will need to be replaced and what it will cost. Boards that update this study regularly tend to avoid the kind of last-minute scramble that leads to a painful special assessment.
What Do the New Insurance Rules Mean for Scottsdale Condo Buyers?
Insurance costs have been climbing across Arizona, and Fannie Mae built some flexibility into the new rules to respond to that. A few changes stand out:
Roofs no longer have to carry replacement-cost coverage. HOAs can now insure roofs on an actual cash value basis, which accounts for depreciation. That can lower a master insurance premium, but it also means a roof claim might pay out less than what a full replacement actually costs.
Master insurance policies can now carry a per-unit deductible of up to $50,000, as long as owners carry their own supplemental policy (often called an HO-6 policy) to cover that gap. This is a big jump from what most HOAs used before, and it shifts more of the risk down to individual unit owners.
If your building's master policy has a per-unit deductible, you're required to carry an individual condo owner's policy sized to cover it. That's worth checking with your insurance agent, especially if you're getting ready to sell or refinance. A gap here can hold up closing.
The new rules also retired the requirement that HOA master policies carry inflation guard coverage, a feature that automatically increases coverage limits over time to keep pace with rising construction costs.
Which Scottsdale Condo Buildings Could Feel This the Most?
Scottsdale's condo market spans a wide range, from entry-level resort condos near 85251 starting around $325,000 to luxury towers well above $1 million. That range matters here, because older, smaller, and less well-funded associations tend to feel these changes the most.
Buildings with thin reserves, aging roofs, or deferred maintenance will likely see the biggest cost increases as boards work to hit the new 15% reserve minimum. Buyers looking at these buildings should ask for the HOA's most recent reserve study and budget before writing an offer, not after.
On the flip side, well-managed associations with healthy reserves and updated insurance may barely notice the change. And small buildings that now qualify for the expanded Waiver of Project Review could see financing get a little easier, not harder.
Bottom line for buyers: don't judge a condo by its HOA dues alone. Ask what those dues are funding, and ask to see the numbers.
By the Numbers
• Scottsdale's median condo list price: $478,000 as of July 2026
• Active condo listings citywide: 895 units in July 2026
• Average days on market for Scottsdale condos: 68 days
• Sale-to-list price ratio for condos: 95.8%
• Entry-tier resort condos in 85250 and 85251 start near $325,000
• HOA reserve requirement rising from 10% to 15% of the annual budget
• New maximum per-unit insurance deductible on master HOA policies: $50,000
• Limited Review process retirement takes effect for loans dated August 3, 2026
The Bottom Line
These new Fannie Mae rules aren't something to panic about, but they are something to plan around. If you're selling a condo, get your HOA's financial documents in order early so a Full Review doesn't slow down your closing. If you're buying, ask for the reserve study and budget before you fall in love with a unit. And if you're on an HOA board, now's a smart time to talk with your management company about where your reserves stand before the 2027 deadline arrives.
Frequently Asked Questions
Do these new rules apply to every condo loan in Scottsdale? They apply to loans that Fannie Mae buys or guarantees, which covers most conventional condo mortgages. Cash buyers and some portfolio or private lenders aren't bound by these rules.
When does the 15% reserve requirement actually take effect? It applies to condo projects reviewed under the Full Review process for loan applications dated on or after January 4, 2027.
What happened to the Limited Review shortcut? It's gone for loan applications dated on or after August 3, 2026. Most established condo projects now need a Full Review unless they qualify for a Waiver of Project Review.
Will my HOA dues go up because of this? It depends on your building's current reserve funding. Associations already near or above 15% may see little change. Underfunded associations may need higher dues or a special assessment to catch up.
Can a small condo building skip the review process entirely? Buildings with ten or fewer units, and five- to ten-unit buildings not tied to a larger master association, can often qualify for a Waiver of Project Review, which skips most documentation requirements.
Sources
Fannie Mae, Lender Letter LL-2026-03 - project standards and insurance rule details, effective dates.
Judy Orr, Realtor® HomeSmart | ADRE #SA689963000 Serving Scottsdale, Cave Creek, Carefree, and North Phoenix, AZ
???? 480-906-1500 ✉️ judyorr@judyorr.com
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