How do we know if a condo’s HOA will be a nightmare?
You don’t have to judge it by feel. Your mortgage already includes a formal examination of the association, and you’re allowed to read what it found.
It only runs on condo projects of more than ten units. In a smaller building, or a townhouse you own outright with a mandatory homeowners association, the lender waives that review and nobody opens the books.
What Does the Lender Check?
Above ten units, the lender runs a Full Review, which tests the association against documents rather than impressions. The budget has to put at least 10 percent toward replacement reserves, rising to 15 percent for applications dated on or after January 4, 2027. No more than 15 percent of units can sit 60 days or more behind on common fees, and the same limit covers each special assessment.
Fannie Mae treats mold, water intrusion, advanced deterioration, a failed mandatory inspection and unfunded repairs above $10,000 a unit needed within a year as critical repairs, and it won’t buy a loan on a project that needs them. Nor will it buy one whose special assessment pays for a critical repair nobody has made, or one facing a lawsuit over safety, structural soundness, habitability or use. Our condo warrantability guide covers the rest of the list.
Massachusetts law explains why your neighbors’ unpaid fees become the bank’s problem. Under M.G.L. c.183A section 6(c), up to six months of unpaid common fees on a unit outrank the first mortgage.
Why Doesn’t Anyone Check the Small Buildings?
Because Fannie Mae waives the review there. The waiver covers detached condo units, 2 to 4 unit projects, 5 to 10 unit projects that aren’t part of a larger master association, and PUDs. Your lender still confirms insurance and a few basics, but never opens the budget, the reserves, the unpaid fees, an assessment or the litigation. A waiver isn’t a clean bill of health. It means nobody looked, which is why the converted two-family with the nice porch can be the riskier buy.
Two things changed on August 3, 2026. Fannie Mae retired the Limited Review, so a bigger down payment no longer buys a lighter look at the association, and the waiver grew to cover projects of ten or fewer units.
Townhouse is a building style, not a form of ownership. Your deed and the master deed decide if you’re buying a condominium unit or a house and lot inside a PUD, which Fannie waives at any size. A low monthly fee reads as good management until you see the reserve line, and what it does to your borrowing power is a separate question.
What Should We Ask for Before We Make an Offer?
Ask the seller’s agent for four documents and look up the fifth. In a bigger building the lender would have demanded it. You aren’t being difficult. You’re running the examination nobody else will.
- The current budget, with the replacement reserve line shown, not a summary
- How many units are 60 days or more behind on common fees
- If a special assessment is voted or pending, and what work it pays for
- Any structural or mechanical inspection from the last three years, and the report itself
- The project’s FHA status on HUD’s public condominium search: Approved, Expired, Rejected or Withdrawn
The FHA lookup is free. Expired usually means somebody stopped recertifying, which earns a question. Fannie Mae’s status for a project isn’t public, so ask your broker to look it up.
A clean 6(d) certificate isn’t evidence the association is healthy. It states what a single unit owes, and the association has to produce it within ten business days of a written request. A spotless one in an underfunded association is ordinary.
GoldCoast is a broker, so a pre-qualification costs nothing and commits you to nothing. Worth a conversation before you write the offer, because these answers belong in week one rather than in underwriting.