For years, buying a condo meant lenders evaluated the buyer.

Now they're evaluating the HOA, too.

New lending guidelines, reserve requirements, and California regulations are making condo financing more complicated, and in some cases, harder to obtain. Whether you're buying, selling, or already own a condo, these changes could affect everything from loan approvals to property values.

The Biggest Shift: Lenders Are Underwriting the HOA

When a buyer applies for a condo loan, lenders have always reviewed the association's finances. But new rules are putting far more scrutiny on HOA budgets, reserves, maintenance plans, and building conditions.

In many cases, a buyer can qualify perfectly and still have trouble getting financing because the HOA doesn't meet lender requirements.

That means the financial health of the association is becoming just as important as the financial health of the buyer.

Reserve Requirements Are Increasing

One major change involves reserve funding.

Historically, many lenders required HOAs to allocate at least 10% of their annual budget toward reserves. New guidelines are increasing that threshold to 15%, and lenders may now rely more heavily on reserve studies rather than simple budget percentages.

If a reserve study suggests an HOA should be setting aside significantly more money than it currently is, lenders may flag the association as underfunded.

For many older condo communities, that could become a serious challenge.

Limited Reviews Are Going Away

Another major shift is the gradual elimination of "limited reviews."

In the past, some buyers could qualify for simplified HOA reviews depending on their loan structure and down payment. Going forward, more transactions will require full HOA reviews, meaning more documents, more scrutiny, and potentially longer approval timelines.

The result? More opportunities for financing issues to surface before closing.

SB 326 Is Creating New Challenges

California's SB 326 balcony inspection law is already having a significant impact on condo communities.

Associations are required to complete inspections of exterior elevated elements such as balconies, decks, and walkways. If inspections identify critical repairs that have not been completed, lenders may determine the project is not eligible for conventional financing.

This can quickly turn a property into what lenders call a non-warrantable condo.

What Does "Non-Warrantable" Mean?

A non-warrantable condo can still be financed, but not through standard conventional loan programs.

That often means:

• Higher interest rates
• Larger down payment requirements
• Additional cash reserve requirements
• Fewer lender options
• More restrictive loan terms

For first-time buyers, these hurdles can dramatically reduce affordability.

The Impact on Condo Values

The concern isn't just financing.

If more condo communities become difficult to finance, the pool of qualified buyers shrinks. Fewer buyers typically mean less competition and slower appreciation.

Well-managed associations with strong reserves and completed inspections may gain an advantage, while underfunded HOAs could face increased pressure from both lenders and buyers.

What Buyers Should Do Now

If you're considering a condo purchase, don't wait until escrow to learn about the HOA.

Review reserve studies, budgets, insurance information, pending assessments, and SB 326 compliance whenever possible. The financial strength of the association may become one of the most important factors in your purchase decision.

The condo market isn't disappearing, but it is becoming more complex.

Buyers who understand these changes before they write an offer will be in a much stronger position than those who discover financing problems halfway through the transaction.

Final Thoughts

The days of evaluating only the unit are fading. Today's condo buyers need to evaluate the building, the HOA, and the long-term financial health of the community.

The good news is that these changes are designed to protect homeowners and encourage stronger, better-funded associations. The challenge is that many communities may need time to catch up.

Short Excerpt

Condo financing is changing. New reserve requirements, stricter HOA reviews, and California's SB 326 regulations are making lenders look beyond the buyer and scrutinize the association itself. Here's what every condo buyer and owner needs to know.