Chicago · Financing guide

New Condo Lending Rules: The Building Now Has to Qualify Too

When you buy a condo with a conventional loan, the lender underwrites two things: you, and the building. New Fannie Mae and Freddie Mac rules have made the building’s half of that review stricter, and another change arriving in January raises the bar again. If you are buying or selling a condo in Chicago, especially in the West Loop, here is what changed and what to check before you write an offer.

1. The abbreviated review is gone

   Lenders used to have a shortcut for established condo buildings, an abbreviated review that barely looked at the association. As of August 3, Fannie Mae and Freddie Mac retired that shortcut. Established projects now generally go through a full review of the association itself, so the building’s finances are part of your loan approval whether anyone planned for it or not.

2. Reserves are the new gatekeeper

   A full review looks closely at reserves, the association’s savings for big future repairs like the roof, elevators, and garage. For loan applications dated January 4, 2027 or later, the standard reserve allocation in that review rises to 15% of the association’s annual budgeted assessment income. A building that budgets well below that mark can fail the review, even when the buyer is perfectly qualified.

3. What a full review actually looks at

   Reserves are the headline, but they are not the whole file. Lenders also look at how many owners are behind on their assessments, whether the association is involved in litigation, whether the building’s master insurance is adequate, how many units are rented out versus owner-occupied, and whether large special assessments or deferred maintenance are on the horizon. None of these are about your unit. All of them can decide your loan.

4. What this means if you are buying

   A building that fails the review is often called non-warrantable, and it does not matter how strong your credit or down payment is. Your options narrow to portfolio or non-QM loans, which usually carry higher rates and fees, or the deal falls apart during underwriting, weeks after you went under contract. The fix is timing: get the condo questionnaire, the current budget, and the reserve picture before you offer, not after.

5. What this means if you are selling

   This cuts both ways. Buildings with healthy reserves and clean paperwork become easier to sell, because every conventional buyer’s lender will reach the same conclusion: this building passes. Buildings with thin reserves face a smaller buyer pool and more financing fall-throughs. If you are selling, having your HOA documents organized and ready is now a genuine selling point, and boards across the city are under pressure to build reserves up, which can mean assessment increases owners should see coming.

6. Questions to ask before you write the offer

   What share of the budget goes to reserves, and is there a recent reserve study? Is the association in any litigation? Are special assessments planned or being discussed? How many owners are delinquent on assessments? And has a buyer in the building closed with a conventional loan recently? These are five-minute questions before an offer and five-week problems after one.

None of this makes a condo a bad buy. It makes the homework non-negotiable. This is the same building check I run with my buyers before we offer, because finding out during underwriting is the expensive way to learn it. I am a broker, not a lender, so I do not quote rates or make lending decisions. I just make sure the building question gets asked early, while there is still time to act on the answer.