Homeready Condo Requirements for a Conventional Loan

The Quick Read: A HomeReady loan on a condo has to pass two separate gates at once: the borrower rules and the building’s project standards. There is no separate condo rulebook for HomeReady. The buyer must fit the program’s income and occupancy rules, and the condo project must meet Fannie Mae’s project standards. Fail either one and the loan stops, however strong the other side looks. Everything below is subject to lender guidelines and full file review, and none of it is a commitment to lend.

What Is HomeReady, and Why Do Condos Get Extra Scrutiny?

HomeReady is Fannie Mae’s low-down-payment conventional program for buyers at or below an income ceiling. It is a standard product, not a first-time-buyer program. Across the wholesale programs Lendmire places files with, the envelope on a one-unit principal residence is 97% leverage when at least one borrower is a first-time buyer (no ownership interest in a residence in the previous three years) and 95% otherwise. That is 3% or 5% down, subject to lender guidelines.

Condos get extra scrutiny because you don’t own the whole building. Your loan depends partly on whether the association is financially healthy and the structure is sound. A lender is selling the loan into a pool and has to stand behind the claim that the project meets Fannie Mae’s requirements. Fannie Mae’s general property rules allow units in condo, co-op and PUD projects so long as the project meets its standards.

If you are weighing this against other options, Lendmire’s conventional loan programs page covers how the standard conventional lane compares.

The Borrower Gate: What You Have to Satisfy

Under the Fannie Mae Selling Guide section B5-6-01, loans at the highest leverage tier carry specific limits:

• Purchases or limited cash-out refinances only.
• Fixed-rate terms up to 30 years. No adjustable rates and no high-balance loans at that tier.
• A one-unit principal residence. Every borrower must occupy it, with an exception tied to a Community Seconds lien.
• Automated underwriting through Desktop Underwriter (DU).
• Combined leverage can reach 105% only with a Community Seconds subordinate lien.

Income limit. HomeReady caps qualifying income at 80% of area median income. The limit follows the property’s location, not where you live now. A buyer over the limit can’t use HomeReady, however good the condo is. Fannie Mae offers an Area Median Income lookup tool by address, and DU flags when entered income appears to fit. Fannie Mae’s rules have also waived the income cap for properties in low-income census tracts, so confirm how that treatment applies to your property’s tract with your loan officer.

Credit and ratios. Across the wholesale conventional programs, the floor starts at a 620 decision score, and the automated finding governs most files with a total ratio ceiling of 50%. Manually underwritten loans run tighter ratios of 36% or 45%, with the reserve and score factors of the Eligibility Matrix. HOA dues count as part of housing expense, so a building with high dues eats into the ratio. Waiting periods after credit events are agency rules: four years from a chapter 7 discharge, seven from a foreclosure, four from a short sale or deed-in-lieu, shorter with documented extenuating circumstances.

Mortgage insurance. It is required above 80% leverage. You may request cancellation at 80% of the original value (with good payment history, no subordinate liens and no decline in value), and the servicer must end it automatically at 78%. Published typical annual premiums run 0.58% to 1.86% of the balance. That is a range, not a quote. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

How Is the Loan Underwritten, Step by Step?

The process is two parallel tracks that meet at the end.

1. DU runs with HomeReady selected. The lender identifies the loan as community lending and picks the product. DU can also message when income appears to fit the limits.

2. The project gets classified. Fannie Mae’s project standards in B4-2.1-01 sort buildings by unit count, attached or detached, condo, co-op or PUD, new or established, and transaction type.

3. The lender picks the review path. Depending on the project, that means a Full Review through Fannie Mae’s Condo Project Manager, a PERS review, an FHA-approved project, or no thorough review at all for certain project types.

4. The ineligible-project screen runs. More on that below.

5. The unit is appraised separately. Fannie Mae says project review is in addition to borrower underwriting, the transaction terms and the unit appraisal.

6. The lender supports its representation. If the HOA questionnaire doesn’t supply what the lender needs, the lender gets the information elsewhere. That can mean meeting minutes, financial statements or an engineer’s report. The lender decides what it needs.

The two-gate point matters most here. A strong borrower can be declined because the building fails. Eligibility is partly out of your hands.

What Changed for Established Condo Projects?

Limited Review is gone for newer applications. Fannie Mae’s project Q&A says it was retired for applications on or after August 3, 2026. Historically, a buyer with more equity could often use that lighter route. Now many established projects with more than 10 units need a Full Review or a waiver.

That kills a common assumption: “a bigger down payment gets me around the condo review.” It doesn’t anymore. Older guides and blog posts predate the change, so check the date on anything you read. Secondary sources also describe pending changes to reserve requirements. Ask your loan officer what applies on your file rather than relying on a blog summary. Terms depend on the lender’s guidelines, the property type, the leverage, and a full review of the credit profile.

Which Condo Projects Are Ineligible?

Fannie Mae’s ineligible-project rules in B4-2.1-03 list characteristics that stop a loan regardless of the borrower:

• Timeshare, fractional or segmented ownership.
• Pending litigation naming the HOA or developer that relates to safety, structure, habitability or functional use.
• Single-entity ownership above the guide’s thresholds.
• Projects that need critical repairs, including material deficiencies and significant deferred maintenance.

Two points from Fannie Mae’s Q&A deserve attention. A project that fails a mandatory state or local structural or safety inspection is ineligible. And it stays ineligible until the critical repairs are completed.

That last point trips up a lot of buyers. A special assessment doesn’t fix the problem. If the repairs aren’t finished, the project remains ineligible even after the assessment is levied. And special assessments tied to repairs can themselves be a deal-breaker.

Where the General Rule Breaks: Edge Cases

Detached condo units and small projects. Fannie Mae lists detached condo units and units in projects of 2 to 10 units among the loans that need no thorough project review. The project can still be ineligible for other reasons, and the borrower gate still applies.

New and newly converted projects. These carry extra tests. The project or legal phase must be substantially complete, with no more than one legal phase per building.

Limited cash-out refinances. HomeReady limited cash-out refinances above 95% require that the existing loan be owned by Fannie Mae. Fannie Mae limited cash-out refinances of its own loans can qualify for a Waiver of Project Review, which still checks for critical repairs and evacuation orders and applies to projects of 11 or more units. In the Lendmire lane, the rate-and-term (limited cash-out) refinance runs to 95% leverage on a one-unit principal residence, or 97% where the existing loan is agency-owned and the first-time-buyer program allows. The exact numbers vary by lender and program and follow a full review of property, leverage, and credit.

Underwriting method. Manual underwriting caps one-unit principal residences at 95% versus 97% in DU, and the limited representation-and-warranty relief DU loans get doesn’t apply.

Combining programs. The Eligibility Matrix lists the HomeReady fixed-rate maximum at 97% in DU and says the more restrictive requirements apply when HomeReady is combined with another program.

Freddie Mac’s equivalent. Home Possible has the same 80% income limit, and condos are an eligible property type. But Freddie Mac has its own project guide, with review expirations and its own ineligible categories. The two guides overlap without being identical.

Florida and other state wrinkles. Fannie Mae’s Q&A references Florida-specific handling. If you’re buying there, ask the lender how it applies.

Occupancy. HomeReady is for principal residences. A second home or rental changes the leverage entirely: second homes run to 90%, investment property to 85% on one unit. That’s a different loan, not a HomeReady one.

Key Terms Defined

Warrantable condo: a condo in a project that meets Fannie Mae or Freddie Mac standards, so the loan can be sold to them. A non-warrantable condo doesn’t meet them.

Project review: the lender’s check of the building and HOA, separate from your personal underwriting.

Full Review: a thorough review of the project’s finances, insurance, legal status and condition.

Critical repairs: serious structural or safety defects that make a project ineligible until fixed.

Area median income (AMI): the local income benchmark used to set HomeReady’s 80% ceiling.

DU: Desktop Underwriter, Fannie Mae’s automated underwriting system.

How to Vet a Building Before You Make an Offer

Ask these before you fall in love with a unit. They mirror what a lender will need anyway.

1. Check the income limit first. Look up the property’s address in the AMI tool. If you’re over, none of the rest matters.

2. Ask whether the building is in litigation. Anything touching safety, structure or habitability is a red flag.

3. Ask about recent or pending special assessments and what they fund.

4. Ask about deferred maintenance and inspection results. Has the building passed any mandatory structural or safety inspection?

5. Ask how many units are owned by one entity and whether short-term or hotel-style rental is allowed.

6. Ask about insurance coverage and whether the master policy has gaps.

7. Ask your loan officer which review path the building will likely need.

8. Request the HOA questionnaire and financials early. The project review depends on the HOA, so the process leans on a party you don’t control. Qualitatively, expect more paperwork and more HOA dependency than a single-family purchase.

A Walk-Through Scenario

Picture a first-time buyer purchasing a one-unit condo as a primary home, putting 3% down. The household income sits under the 80% limit for the property’s location. Credit and ratios clear DU, including the HOA dues in housing expense. So far the borrower gate is open. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.

Now the building. It’s an established project with more than 10 units. Under the current rules it needs a Full Review or a waiver, since Limited Review is retired. The lender requests the questionnaire and financials. The statements show a healthy HOA, but the meeting minutes reveal an unresolved structural repair and a lawsuit over water intrusion. That triggers two ineligibility characteristics, litigation tied to structure and critical repairs.

The borrower did everything right. The loan still stops. The practical lesson: the buyer’s options are to wait until repairs are completed and the project qualifies, move to a different building, or look at other financing. Ask about the building before you pay for an appraisal.

What If the Condo Isn’t Eligible?

You have a few paths. None is automatically better, and the right one depends on how much the building’s problem matters to you.

A non-warrantable condo isn’t worthless. It simply can’t ride on these agency programs, and some lenders hold such loans on their own terms, usually with stricter requirements. If a building fails because of real structural trouble, treat that as information about the building, not just a loan problem.

HomeReady vs. Other Low-Down-Payment Options on a Condo

The flip point: if your income is under the limit, HomeReady can fit well. If it’s over, standard conventional leverage is similar and carries no income cap. For many condo buyers the building matters more than the program label.

For related reading, Lendmire’s piece FHA and Conventional Cash-Out Requirements for a Condo Primary Home covers the refinance side of the same project rules.

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Selling Guide B2-3-01

2. Fannie Mae Selling Guide B5-6-01: HomeReady Loan and Borrower Eligibility

3. Fannie Mae Selling Guide B4-2.1-01: General Information on Project Standards

4. Fannie Mae condo project Q&A

5. Fannie Mae Selling Guide B4-2.1-03: Ineligible Projects

6. Fannie Mae Selling Guide B5-6-02: HomeReady Underwriting Methods

7. Fannie Mae Eligibility Matrix