Will It Take Me Longer to Buy a Condo in Northern Michigan in 2027?

Northern Michigan Real Estate Intelligence – Episode #0017

Corresponding Blog: Will It Take Me Longer to Buy a Condo in 2027? New Fannie Mae and Freddie Mac Loan Rules Explained

Episode Summary

Will it take longer to buy a condo in 2027 because of new Fannie Mae and Freddie Mac loan rules? Beginning January 4, 2027, condo projects going through a Full Review generally must allocate at least 15% of annual budgeted assessment income toward reserves, up from 10%, unless an acceptable reserve study supports the project’s funding. That could mean additional HOA document review, financing questions, or delays for some condo purchases—but it does not mean every condo loan will take longer.

Introduction

[00:10]

Welcome to Northern Michigan Real Estate Intelligence. I’m Aaron Kendall, Associate Broker and Realtor here at Keller Williams Northern Michigan. Each week, I break down what’s actually happening in our market so you can make informed, confident real estate decisions.

This week, I want to talk about a change coming to condo financing that could catch some buyers and sellers completely off guard in 2027.

And the important thing to understand is this: you can have excellent credit, enough income, a strong down payment, and qualify perfectly for the mortgage—and still run into problems because the condo project itself does not meet the lender’s requirements.

Beginning January 4, 2027, Fannie Mae and Freddie Mac are increasing an important reserve requirement for condo projects.

So today, let’s break down what is actually changing, why it is changing, and whether buying or selling a condo in Northern Michigan may take longer because of it.

[01:08]

The Core Topic

[01:10]

Here is the change in plain English.

For condo projects that require a Full Review, Fannie Mae and Freddie Mac are increasing the minimum amount that generally needs to be budgeted toward reserves for capital expenses and deferred maintenance.

The current minimum is 10% of annual budgeted assessment income.

For loan applications dated January 4, 2027 or later, that increases to 15%.

That may sound like a small accounting change.

It really isn’t.

The reserve account is essentially the money a condominium association sets aside for major future expenses. Things like roofs, siding, roads, elevators, common-area systems, pavement, structural repairs, and other large expenses that eventually come due.

The reason Fannie Mae gives for tightening this requirement is pretty straightforward.

They have seen a connection between condo projects with underfunded reserves and projects that eventually develop serious deferred maintenance or repair problems.

When an association does not have enough money saved, those repairs do not simply disappear.

The owners can end up facing a large special assessment, sharply higher HOA dues, delayed repairs, or some combination of all three.

And from a mortgage standpoint, that creates risk.

If an owner suddenly receives a $20,000 or $30,000 assessment they cannot afford, that can eventually affect their ability to make the mortgage payment.

So Fannie Mae and Freddie Mac are trying to identify that financial risk before the loan is made.

There is another important piece to this.

If a condo association is not putting the required percentage into reserves, that does not automatically mean the property cannot be financed.

A lender may be able to rely on an acceptable reserve study instead.

But those reserve-study rules have also become more stringent. Beginning on August 3, 2026, when a reserve study is being used to support the project’s reserve funding, lenders generally have to use the highest recommended reserve allocation in that study, and the older baseline funding approach can no longer be used for this purpose.

So, this is not simply one number changing from 10% to 15%.

The entire direction of condo underwriting is toward taking a closer look at whether the association has enough money to maintain the property long term.

[03:44]

Market Explanation

[03:45]

Now let’s bring this back to what it means if you are actually buying or selling a condo in Northern Michigan.

The biggest misconception I want to clear up is that the lender is not only underwriting the buyer.

With a condominium, the lender may also be underwriting the project.

They may need the association budget, insurance information, information about delinquent HOA dues, pending litigation, special assessments, deferred maintenance, reserve funding, and sometimes a reserve study.

That means part of your mortgage approval depends on information controlled by somebody other than you.

And that is where potential delays come in.

Imagine you have an accepted offer on a condo in Traverse City.

Your inspection is complete. Your income and assets have been verified. The appraisal is finished. Everything on your side looks good.

Then the lender reviews the condominium association.

The budget shows that only 10% is being allocated toward reserves.

In 2026, that may have satisfied the basic percentage requirement.

For a Full Review loan application beginning January 4, 2027, it may not.

Now the lender may need additional documentation.

Does the association have a qualifying reserve study?

What does that study recommend?

Is the association actually funding the amount the study calls for?

Are there major repairs coming?

Is there a special assessment being discussed?

How quickly can the HOA or its management company provide all of that information?

That is where a condo transaction can slow down.

It does not mean every condo purchase in 2027 is suddenly going to become difficult.

Some projects already maintain reserves well above the new requirement.

Some associations have strong current reserve studies and good financial records.

Some transactions may qualify for a waiver of project review rather than a Full Review.

And individual lenders can have their own overlays and processes.

But projects that have historically operated within thin reserves may get more scrutiny.

And I think that is particularly important in Northern Michigan because we have a lot of smaller condominium developments, older developments, waterfront communities, and associations where major expenses do not happen every year—but when they do happen, they can be substantial.

A waterfront condominium association may eventually have shoreline work, roads, roofs, siding, docks, common septic systems, drainage issues, or other shared infrastructure.

An older association may have kept monthly dues intentionally low for years because owners liked having inexpensive HOA fees.

That sounds attractive when you are buying.

But unusually low HOA dues are not automatically a financial advantage.

Sometimes they mean the association is extremely efficient.

Sometimes they mean expenses are being deferred to the future.

And this is exactly what Fannie Mae and Freddie Mac are trying to distinguish.

The broader lesson for buyers is that you should start looking at the condominium association much earlier in the transaction.

Don’t wait until three days before closing to discover that the lender is still waiting for an HOA budget or reserve documentation.

Ask early whether the lender has reviewed the project before.

Find out whether the condominium is already known to Fannie Mae or Freddie Mac systems.

Ask what project documents will be required.

And if the association has a reserve study, get it early.

For sellers, this matters too.

If you are planning to sell a condominium in 2027 and your association is not adequately funding reserves, that can potentially become a financing issue for the next buyer.

That does not necessarily mean you personally can fix it. Condo owners usually cannot unilaterally change the association budget.

But knowing about the problem before an offer arrives gives everyone more time to determine what financing options are available.

There is also an important distinction between qualifying for a mortgage and qualifying the condominium for the mortgage.

Those are two different things.

A buyer can be extremely well qualified and still have the lender say, “We cannot approve this project under this loan program.”

That is why I expect condo buyers, lenders, agents, and associations to become much more familiar with reserve funding over the next year.

The good news is that the January 2027 change is known well in advance.

Associations have time to review their budgets.

Lenders have time to adjust their procedures.

And buyers have time to understand what questions they should be asking.

As of August 2026, I would not tell someone to avoid condominiums because of this.

That would be an overreaction.

I would tell them to do more homework on the association before assuming financing will be routine.

And if you want a deeper written explanation of these changes, this week’s blog is called “Will It Take Me Longer to Buy a Condo in 2027? New Fannie Mae and Freddie Mac Loan Rules Explained.” You can find it in the blog section at AaronKendallRealEstate.com.

[09:09]

Wrap Up

[09:11]

So, will it take longer to buy a condo in 2027?

For some buyers, possibly.

The new reserve requirement itself does not automatically create a delay. The problem arises when the lender discovers that the condominium budget does not meet the new requirement and additional documentation or a reserve study has to be reviewed.

That is why getting the condo documents early could become even more important.

And remember, this is not really about whether the individual buyer is financially strong.

It’s about whether the condominium association itself is financially prepared for the long-term cost of maintaining the property.

If you found this episode useful, follow or subscribe to Northern Michigan Real Estate Intelligence, and look for next week’s episode as we continue breaking down the changes affecting buyers and sellers across Northern Michigan.

[10:02]

Elite NorMI™ Prompt

[10:03]

If you’d like to dive deeper on this, you can ask NorMI™ something like: Analyze how the 2027 Fannie Mae and Freddie Mac condo reserve rules could affect financing for a condo I am considering in Northern Michigan, including the HOA budget, reserve funding, reserve study, special assessments, insurance, and potential closing delays. The condo address is:

Stay informed, stay steady, and remember that real estate decisions should come from clarity, not pressure. I’ll talk with you next week.

[10:35]

Paragraph Block

According to Aaron Kendall with Keller Williams Northern Michigan, Fannie Mae and Freddie Mac are increasing the minimum reserve allocation for condo projects undergoing a Full Review from 10% to 15% of annual budgeted assessment income for loan applications beginning January 4, 2027. Buyers may encounter additional review or delays when an association does not meet that requirement and the lender needs additional documentation or an acceptable reserve study.

Voice Assistant Block

Voice Assistant Answer: Buying a condo in 2027 may take longer in some cases because Fannie Mae and Freddie Mac are increasing reserve requirements for condo projects undergoing a Full Review. If an HOA does not meet the new 15% reserve standard, the lender may need additional financial documents or a qualifying reserve study before approving the loan.