If you've bought or sold a condo in the last couple of years, you may have noticed your lender asking for a lot more paperwork than they used to — HOA budgets, reserve studies, questionnaires about who else lives in the building. That's not your lender being difficult. It's the new normal for condo financing, and it's worth understanding whether you're house hunting or getting ready to list.
Why the rules changed
In June 2021, the Champlain Towers South condo building in Surfside, Florida, partially collapsed, killing 98 people. The tragedy was traced back to structural issues and deferred maintenance that had been known for years but not addressed. In the aftermath, Fannie Mae and Freddie Mac — the two agencies that back the vast majority of conventional mortgages — significantly tightened the standards a condo building has to meet before a loan on a unit inside it can be sold to them.
That matters because most lenders sell their loans to Fannie or Freddie shortly after closing. If a building doesn't meet their standards, buyers in that building lose access to conventional financing, which can affect every unit's value, not just the one being sold.
The good news: none of this is designed to scare anyone off condos. It's designed to catch problems early, before they become a Surfside-level crisis. Most buildings sail through without issue.
Warrantable vs. non-warrantable: why it matters
You'll hear your lender use the term "warrantable" a lot this year. A warrantable condo is one that meets Fannie Mae and Freddie Mac's guidelines, which means it qualifies for a standard conventional mortgage with the best rates and the lowest down payment requirements.
A non-warrantable condo fails one or more of those guidelines. It's not necessarily a bad building or a bad investment — but financing gets harder. You'll typically need a portfolio loan from a bank that keeps the loan in-house, often with a higher interest rate, a bigger down payment, or both.
In a city with as much vintage and high-rise condo stock as Chicago, this distinction can make a real difference in which buildings attract the widest buyer pool.
What lenders are actually checking
Here's what's new or newly strict on the condo questionnaire your lender will send to the HOA or management company:
- Reserve funds. The association's reserves need to be at least 10% of its annual budget, allocated specifically for long-term repairs and replacements — not just sitting in a general operating account.
- Special assessments. Lenders want to know about any recent or pending special assessments, and why they were needed.
- Deferred maintenance. Buildings with known, unaddressed repair needs — especially to the roof, facade, plumbing or structural elements — raise flags.
- Structural and safety issues. Any building with a failed inspection, an engineering report citing significant concerns, or unresolved safety violations will have a hard time qualifying.
- HOA litigation. Associations involved in lawsuits, particularly over construction defects or safety, are scrutinized closely.
- Investor concentration. No single entity — an investor, a developer, a management company — can own more than 10% of the units in most cases. Buildings with too many investor-owned units, or too high a percentage of non-owner-occupied units overall, can also run into trouble.
None of this is exotic underwriting — it's really just common sense questions about whether the building is being well run and well maintained. But it's being asked earlier and checked more thoroughly than it used to be.
If you're buying: get ahead of it
The biggest shift for buyers is timing. Pre-approval used to mostly be about your own finances — income, credit, assets. Now, for a condo purchase, it's just as much about the building. A good lender will ask for the condo questionnaire and HOA documents (budget, reserve study, meeting minutes, master insurance policy) early in the process, not after you're already under contract with an inspection deadline looming.
My advice to buyers: before you write an offer on a condo you love, ask your agent to pull what's available on the building — recent assessments, litigation, reserve health — and loop your lender in right away. It's much better to learn a building has financing issues before you've fallen in love with the unit than after you're three weeks into escrow.
If you're selling: be proactive
If you're an HOA board member or a seller in a self-managed or small association, a little preparation goes a long way. Have your reserve study, budget and meeting minutes organized and ready to hand over. Know your reserve percentage off the top of your head. If there's a special assessment or a known maintenance item, be upfront about it rather than letting a buyer's lender discover it mid-transaction.
I've seen deals move smoothly through this process and I've seen deals fall apart at the finish line over documents nobody thought to gather until the lender asked. The difference is almost always preparation. A board that already has its paperwork in order — and a seller who knows the building's financial health — gives buyers' lenders exactly what they need, when they need it, and that keeps closings on schedule.
My local tip: pair the right agent with the right lender
This is exactly the kind of thing where having a local agent and a local lender who know what they're looking at saves everyone a headache. I work closely with preferred lenders who understand Chicago and west suburban condo buildings — the older high-rises downtown, the smaller walk-up associations in Oak Park and River Forest, the newer construction in the suburbs — and who know how to spot a red flag on a condo questionnaire before it derails a closing.
If you're buying or selling a condo anywhere in the city or the western suburbs, loop me in early. I'll help you understand what a building's financials actually tell you, and connect you with a lender who's done this enough times to move quickly when a building's paperwork is solid — or flag it fast when it isn't.
The reassuring part
None of this means condos are suddenly a risky purchase. The large majority of well-run buildings — ones with healthy reserves, no major deferred maintenance and reasonable owner-occupancy — pass these reviews without any drama at all. The new scrutiny is simply catching the small number of buildings that genuinely do have problems, which is good for everyone, including the owners already living there.
If you're thinking about buying or selling a condo in Chicago or the west suburbs, get in touch and let's talk through what to look for. A little knowledge up front makes the whole process a lot less stressful.
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