Certain insurance requirements may cause a condo to be deemed unwarrantable by Fannie Mae
You’re a condo buyer. You have excellent credit, plenty of income and a solid down payment. But you still can’t get a conventional mortgage on the unit you want to purchase.
It’s not you, it’s them.
Fannie Mae Strikes Again
Fannie Mae changed how it treats certain condo insurance deductibles in 2026.
First, a quick explanation of the insurance we’re talking about. A condominium association carries a master insurance policy covering the building and common property. That’s separate from the individual condo insurance policy, often called an HO-6 policy, that an owner buys for their own unit and belongings.
Like other insurance, the association’s master policy has a deductible, the amount that has to be paid before the insurance company begins paying their portion of a covered claim. Ok, but why should you care about an insurance policy you didn’t buy?
Because it can affect whether you can get a mortgage.
Your Lender Isn’t Just Approving You
When you apply for conventional financing to buy a condo, the lender doesn’t just evaluate your credit, income, debts and down payment. The lender also has to evaluate the condominium project. Fannie Mae has requirements for the association’s finances, reserves, physical condition and insurance. If the project doesn’t meet applicable requirements, the condo may be considered unwarrantable for Fannie Mae financing.
That’s how a perfectly qualified buyer can run into a financing problem. You can have excellent credit, plenty of income, a large down payment and a mortgage preapproval.
You qualify. The condo doesn’t.
So What Changed With Insurance?
Fannie Mae already had requirements governing the deductibles it would accept under a condominium association’s master insurance policy.
In 2026, it changed the way it evaluates one particular kind: a per-unit deductible.
Let’s translate that from insurance-speak.
The association owns the master insurance policy and is responsible for its deductible. But a master policy can also have a deductible that applies separately to an individual condo unit.
Fannie Mae now puts a clear ceiling on that amount:
A master-policy deductible applied per unit cannot exceed $50,000.
If the master policy has a per-unit deductible, the buyer must also carry an individual condo insurance policy with enough coverage to cover that deductible.
There is another Fannie deductible rule that’s been around longer. It generally limits the deductible for required property insurance perils under the association’s master policy to 5% of the property’s insurance coverage amount.
These are not two versions of the same rule. Fannie did not replace 5% with $50,000. They address different ways a master insurance policy can structure its deductibles.
For a buyer, the important point is much simpler:
If the association’s insurance doesn’t meet Fannie Mae’s requirements, it can create a problem with your conventional financing.
What Could This Cost You?
Potentially the condo you were planning to buy.
This isn’t necessarily a problem that can be fixed by putting more money down or improving your credit. The problem is with the condominium project.
Financing options for a non-warrantable condo can be more limited. Some buyers may be able to find a lender offering portfolio or other nonconventional financing. Others may have to walk away. And a financing problem doesn’t affect only the buyer trying to purchase today.
If fewer buyers can obtain conventional financing in a building, the potential buyer pool for every owner who eventually wants to sell can shrink.
Could The Association’s Deductible Also Become Your Bill?
Potentially.
This is a separate issue from whether Fannie Mae will finance the condo, but not from the decision about whether or not to purchase it.
The association is responsible for the deductible under its master insurance policy. But depending on applicable law, the condo documents and the circumstances of a loss, an association may sometimes be permitted to pass part of that deductible on to an individual condo owner.
How much an owner can actually be charged isn’t determined by Fannie’s $50,000 financing limit.
For DC condo owners, this distinction is particularly important.
Current DC law permits an association, under specified circumstances, to charge an owner up to $5,000 of the master-policy deductible when a loss originates in that owner’s unit.
DC Council Bill 26-0495 proposes increasing that potential owner responsibility from $5,000 to $25,000.
That proposal raises a different set of insurance concerns, which I’ve covered separately. The short version is that where a loss originates isn’t necessarily the same thing as determining who caused it. A pipe or appliance connection can fail inside your unit without you having done anything wrong.
So keep the two issues separate:
- Fannie Mae’s rules determine whether the association’s insurance is acceptable for Fannie Mae financing
- DC law can determine how much of the association’s deductible may potentially be passed on to you.
Can’t You Just Check Before Making An Offer?
You’d think so.
This is where the warrantability system starts to break down for consumers.
The information your lender may need is controlled largely by the condominium association, its insurance company or agent, and frequently a property management company.
As a prospective buyer who hasn’t even made an offer yet, you may not have access to it.
Associations aren’t necessarily going to provide detailed financial and insurance documents to every person considering buying a unit. Management companies may charge for documents and questionnaires are forms only lenders can submit. A lender’s condominium review typically doesn’t begin until a ratified contract is in place. You may already be paying for an inspection, appraisal and other costs associated with purchasing the property. Only then may the lender receive the information necessary to discover that the condo itself has a financing problem.
Doesn’t The Listing Agent Know Whether The Condo Is Warrantable?
Don’t count on it.
A listing agent may not have reviewed the association’s master insurance policy. The agent may not know the structure of its deductibles, whether the association carries additional insurance, or whether the building currently meets Fannie Mae’s project requirements.
And real estate agents shouldn’t be interpreting complicated commercial insurance policies and declaring buildings Fannie-compliant anyway. That’s a determination for the lender.
This creates an obvious information gap.
The lender needs the information. The association or management company controls much of the information. The buyer often can’t readily obtain the information. But the buyer may already be under contract before the lender performs the review.
Please Don’t Become An Insurance Underwriter
You shouldn’t have to decipher a commercial insurance policy to buy a condo.
A condominium master policy may contain different deductibles for different types of losses, endorsements that change the coverage, separate provisions and terminology most consumers have never encountered.
There can even be separate deductible buy-back insurance, which is additional insurance an association purchases to reduce its exposure to a large deductible. A deductible that initially appears too high may therefore not necessarily make the project ineligible.
That’s why looking at one number on an insurance document and declaring a condo “warrantable” or “unwarrantable” isn’t a good idea. Let the lender make that determination.
What Can You Do Before Making An Offer?
There is no foolproof way for a buyer to preapprove every condominium building before making an offer. But you can try to identify problems early.
Ask your lender whether it has recently financed another unit in the building and whether it already has useful information about the project. A recent conventional sale doesn’t guarantee that your loan will be approved, but it can provide another clue.
You can also ask whether the seller can obtain current association insurance information for your lender to review.
The earlier a potential problem is identified, the better.
Condo Sellers And Listing Agents Can Help
Sellers can also make this process less difficult. Don’t wait for the buyer’s lender to discover an insurance problem after the property is under contract. Before listing a condo, owners should ask their association or management company for:
- The current declarations page for the association’s master property insurance policy, showing the property’s coverage and applicable deductibles.
- Written information about any deductible that applies separately to an individual unit, including the amount.
- Documentation of any deductible buy-back insurance carried by the association.
The seller and listing agent don’t need to determine whether those documents satisfy Fannie Mae. They need to have the information available so a prospective buyer can get it to a lender as early as possible.
This Is Bigger Than Insurance
Insurance is only one piece of Fannie Mae’s expanding scrutiny of condominium projects.
Fannie also has requirements involving association finances, reserves, critical repairs and other aspects of a project’s financial and physical condition. Reserve requirements are becoming more demanding in 2027.
That means conventional condo financing increasingly depends on information about a building that an individual buyer neither controls nor may be able to obtain before making an offer.
You know your income. You know approximately how much money you have for a down payment. You can check your credit. Your lender can preapprove you for a mortgage before you start shopping.
But there is no equally simple preapproval you can obtain for every condominium building you might consider.
Fannie keeps expanding the number of things about a condo project that can kill a buyer’s financing, while buyers have no practical way to determine whether the project qualifies before committing to buy it.
Is Anyone Looking At The Cumulative Effect?
There are legitimate reasons for Fannie Mae to care about a condominium’s reserves, physical condition and insurance. There are legitimate reasons for insurers to price risk accurately and for lawmakers to make sure condominium associations remain financially stable. But there’s another question that deserves to be asked:
Are all of these changes, taken together, making an already difficult housing market worse?
There was a time when a first-time condo buyer’s biggest financial challenge was figuring out how to come up with the down payment and closing costs. Buying a condo has always required due diligence, but increasingly buyers are being tasked with evaluating risks involving the finances, reserves, physical condition and insurance of an entire building, using data and materials they may not even have access to.
And much of the risk is moving in the same direction.
Fannie Mae protects itself from condominium project risk by imposing more requirements on the buildings it will finance. Associations facing higher insurance costs and reserve requirements pass those costs along through higher condo fees and, sometimes, assessments. DC Council is considering allowing associations to shift substantially more of a master-policy deductible to an individual owner when a loss originates in that owner’s unit.
Each institution is trying to manage its own risk or solve its own problem. The combined burden lands on the condo owner and buyer.
And this is happening while DC’s condo market is already struggling. Buyers are struggling with affordability, and condominiums provide one of the more accessible paths to homeownership in an expensive market.
Now layer on higher association insurance costs, larger deductibles, increasing reserve requirements, higher condo fees, possible special assessments and more ways for a condominium project to fail conventional mortgage requirements.
Each requirement may make sense when considered by itself, but buyers don’t experience these rules one at a time. They experience all of them at once. At some point, the question stops being simply “Can I afford to buy this condo?” It becomes “Is buying this condo worth the financial risk and uncertainty?” For some prospective buyers, particularly first-time buyers with the option to wait, the answer may be: I’ll rent for another year and reconsider buying later. That buyer doesn’t show up as a denied mortgage or a failed condo sale. They simply never enter the market. That’s the cumulative effect that’s easy to miss when every institution looks only at the particular problem it is trying to solve.
At some point, somebody needs to look beyond the individual requirement and ask what all of this is doing to the housing market.
Are we protecting condominium ownership, or are we making condominiums increasingly difficult to buy, own and sell?
And are we protecting associations and management companies at the expense of the owners for whom they are supposed to work?
Why Isn’t There A Public Warrantability Database?
This may be the most frustrating part.
Fannie Mae already operates a system called Condo Project Manager, or CPM, that lenders use in evaluating condominium projects.
But buyers don’t have a comprehensive public, address-searchable database that simply tells them whether a condominium project currently meets all of Fannie Mae’s requirements.
Even a Fannie project approval doesn’t completely solve the problem. Lenders remain responsible for verifying that the project’s insurance meets Fannie Mae’s requirements.
So buyers can research mortgage rates, estimate payments, check their credit and get preapproved before ever making an offer.
But they can’t necessarily answer one of the most basic questions about a condo they’re considering:
Can I actually finance this unit with the conventional mortgage I plan to use?
If Fannie Mae is going to make project-level requirements increasingly important to mortgage eligibility, consumers need far greater transparency into project eligibility.
A useful public system could show a project’s current eligibility status, when the information was last reviewed and which requirements remain unresolved or need to be updated. Insurance, budgets, reserves and other information obviously change, so those records could have review dates and expiration dates.
That’s what databases are for.
It could also reduce the duplication involved when lenders repeatedly have to evaluate the same condominium projects for different transactions while buyers remain largely outside the information loop.
None of this means Fannie Mae should finance poorly insured buildings, unsafe buildings or condominium associations with serious financial problems. And condo buyers wouldn’t want to purchase in one.
It means consumers should have a reasonable way to discover those problems before they commit to buying a unit.
If Fannie is going to underwrite the building as well as the borrower, buyers should be able to check the building before they buy.
There is a point at which the cumulative effect of all these individual protections crosses a buyer’s tolerance threshold. Another insurance requirement, another law, another reserve requirement, another potential assessment, another financing hurdle, another risk shifted to the unit owner. Eventually, some condo buyers will simply decide the costs, risks and uncertainty of condo ownership are no longer worth it and opt out.
That may be the risk everyone in this system is overlooking. Fannie Mae, lenders, insurers, associations and management companies can each protect their own interests, but the condominium market still needs buyers. Keep piling on, and eventually some of them will decide not to buy. And then doesn’t everyone lose?
