A condo can look financially sound on paper while raising questions during the mortgage process. Lenders may need to examine the association's finances, insurance, litigation, and building documentation before approving a conventional condo loan.
That process became more important in August 2026, when Fannie Mae retired Limited Review and Freddie Mac ended Streamlined Review for applicable loans. Some projects may still qualify for review waivers, but buyers and sellers now have more association-level details to address during a transaction.
Limited and Streamlined Review options ended for applicable loans on August 3, 2026. Many conventional condo purchases now involve more detailed project review, including reserves, financial records, litigation, and insurance. Certain smaller condo projects may still qualify for review waivers under the updated lending requirements.
Fannie Mae and Freddie Mac Review Changes
Surfside didn't produce overnight changes, but it contributed to years of evolving building safety and lending standards. The August 2026 retirement of Limited and Streamlined Review is another step in that evolution. The new Fannie Mae and Freddie Mac condo rules also affect how lenders evaluate applicable projects.
Fannie Mae also increases its minimum reserve allocation from 10% to 15% for applicable Full Review loans with applications dated January 4, 2027, or later. Financing a Chicago condo may depend not just on credit score and income, but also on the association's financial records.
Buildings with incomplete documentation may need additional preparation before a lender can complete its review. That does not necessarily mean an association is poorly managed. Some associations may simply have less formal documentation than lenders now require. Full project review gives lenders a closer look at a building's finances, reserves, insurance, litigation, and other required records.
The Records Chicago Condo Sellers Need Ready
Sellers and their associations also need to prepare for added documentation requirements.
The Illinois Condominium Property Act already requires associations to maintain various financial and operational records. Resale disclosures also provide buyers with information about the association's finances, reserves, insurance, and anticipated capital expenditures.
For self-managed associations, keeping these records organized can become especially important during a sale. Documents that may be requested during financing or buyer due diligence include:
- Meeting minutes
- Current budget and financial records
- Reserve information or a reserve study
- Insurance documentation
- Other required association records
Certain smaller projects may qualify for a Waiver of Project Review if they meet applicable requirements. Associations must still provide required records and disclosures when applicable.
Sellers whose associations cannot provide necessary records promptly may experience transaction delays. A seller might point to a neighbor who closed months earlier without providing the same documentation. However, a transaction completed before August 2026 may have qualified under review processes that are no longer available.
Mario has spent 24 years navigating changes in Chicago's condo market, including evolving transaction requirements.
"What I tell sellers, which is probably more important, is this: your three-unit condo association, the one you thought didn't need a budget, where meeting minutes were just emails about when we're meeting for drinks after the meeting, you now have to actually have those documents. Put all that aside. Even the small self-managed three-unit association needs to have all their ducks in a row."
— Mario Greco, Founder, The MG Group at Compass
When Self-Management Affects Condo Financing
The documentation challenge doesn't end with small associations. Some 8-, 10-, or 20-unit buildings may choose self-management to reduce management costs. That decision can make financial sense, but the association still needs to maintain appropriate records for unit owners and prospective buyers.
Mario addresses these situations directly with building owners:
"You need to have an actual budget. You need to show that 10%, and up to 15% after January 1st, is going to reserves. You need to have a reserve study, either a recent one or be ready to get one. Otherwise, your buyers won't be able to get a loan in this building unless they're putting a substantial amount down or have 800-plus credit. Maybe spending a little more on a management company will do you all better. You're not going to want a bunch of dead deals in your building."
— Mario Greco, Founder, The MG Group at Compass
The central concern is whether the association can provide the financial documentation required for the buyer's financing. A larger down payment or high credit score does not automatically remove condo project eligibility requirements for conventional loans. Some projects qualify for review waivers, while portfolio lenders and other financing programs may have different requirements.
A building that cannot meet applicable condo review standards may have fewer conventional financing options, potentially limiting buyer interest and negotiating flexibility. Those effects are worth comparing with the savings from self-management, particularly when owners are preparing to sell.
A reserve study completed by a qualified specialist can help document expected repairs and the funding needed to maintain the building. When an association relies on a reserve study for lender review, the study must meet applicable requirements.
Not sure how a building's association health could affect financing? Connect with the MG Group team before writing an offer to discuss the property's documentation and financing considerations.
The Information Buyers Gain From Full Reviews
Full condo association review gives buyers another opportunity to examine a building's financial condition and association records before closing. The review can identify pending litigation that could affect the property or complicate financing. Buyers can also review the association's master insurance coverage and consider whether their personal unit policy needs additional protection.
The Illinois attorney review period remains an important opportunity to request and examine association documents. That includes the Section 22.1 disclosure, which provides information about reserves, pending litigation, insurance coverage, and anticipated capital expenditures.
Full lender review adds another checkpoint for applicable loans, operating alongside the legal review rather than replacing it. Together, these processes give buyers additional information about the property and its association before closing.
For a detailed breakdown of the process, read How Chicago Buyers Use Attorney Review to Compete Without Gambling Their Earnest Money.
Rate Locks and Financing Timelines
The effect of the updated requirements on closing timelines is still developing as lenders and associations adjust their documentation processes. The next reserve funding increase applies January 4, 2027, giving affected associations time to review their budgets.
Documentation delays can become more significant when a buyer's rate lock approaches expiration. If a lender needs additional time to complete its review, the buyer may need to extend or replace the original rate lock. In a rising-rate environment, that could affect the buyer's financing costs.
The practical answer for sellers is preparation. Formalize the budget, locate or commission a reserve study when needed, and confirm that meeting minutes are properly documented. For professionally managed buildings, much of this work may already be complete. Sellers should also confirm that documents are current and readily available when the lender requests them.
FAQs About Chicago Condo Association Reviews
Why did the Limited and Streamlined condo review processes end in 2026?
Fannie Mae retired its Limited Review process, while Freddie Mac ended its Streamlined Review option for applicable loans starting August 3, 2026. The changes followed years of evolving condo project standards involving building conditions, reserves, insurance, and financial documentation. Some projects may still qualify for review waivers under applicable requirements.
What documents might a condo association need for lender review in Chicago?
Depending on the applicable review, lenders may request a budget, financial records, reserve information, insurance documentation, meeting minutes, and litigation information. A qualifying reserve study may also be relevant when the association uses it to demonstrate adequate funding under lender guidelines. Self-managed associations that previously relied on informal communication may need to organize these records before financing can proceed.
How does the 15% reserve requirement in January 2027 change the picture for Chicago condo buildings?
For applicable Fannie Mae Full Review applications, the change starts January 4, 2027. The minimum reserve allocation increases from 10% to 15% of annual budgeted assessment income. Fannie Mae also allows certain reserve-study alternatives under its requirements. Associations that review their budgets early will have more time to prepare for the change.
Does full review affect cash buyers purchasing Chicago condos?
Full project review applies to applicable mortgage financing, so a buyer paying entirely with cash does not go through that lender review. Portfolio and jumbo lenders may have their own project eligibility and documentation standards. Cash buyers should still review association finances, litigation history, insurance, and other building records before completing a purchase.
Can a condo building become ineligible for conventional financing because of an active lawsuit?
Yes, certain types of active litigation involving a condo association can affect a building's eligibility for conventional financing. Structural defect claims and lawsuits involving significant financial exposure may receive particular scrutiny. The type of litigation, its potential impact, and the available legal documentation all matter. The article Litigation Doesn't Have to Kill Your Chicago Condo Deal explains a Chicago case involving building litigation and financing documentation.
What is a Section 22.1 disclosure and how does it relate to full review?
The Section 22.1 disclosure is required under the Illinois Condominium Property Act for applicable condominium resale transactions. It provides prospective buyers with information about association reserves, pending lawsuits, insurance coverage, and anticipated capital expenditures. Full lender review runs alongside these disclosures rather than replacing them. A buyer who identifies limited reserves or anticipated capital expenditures can use that information to evaluate the building's finances.
How does condo association insurance affect a buyer's personal coverage in Chicago?
Association master policies differ in how they cover the building, individual units, and shared property. A personal condo insurance policy should address areas that are not covered by the association's master policy. An insurance broker can review both policies before closing and help identify potential coverage gaps. The article Your Chicago Basement Probably Has a Coverage Gap discusses a related insurance consideration for Chicago property buyers.
What should Chicago condo sellers do right now to prepare for full review requirements?
Sellers in self-managed buildings should review their budgets, confirm reserve funding, and locate a qualifying reserve study when applicable. They should also make sure meeting minutes and other association records are organized and readily available. Sellers in professionally managed buildings should confirm that their management company can produce required documentation promptly. Starting that preparation before listing can reduce uncertainty during contract negotiations and the buyer's financing review.
Preparing for Chicago Condo Association Review
Chicago condo financing now requires closer attention to the association behind the unit. Buyers should review the building's financial records, reserves, insurance, litigation, and other documentation before moving forward.
Sellers can take similar steps before listing. Identifying missing records early gives the association more time to organize documents and address potential issues before a buyer's lender requests them.
Schedule a walkthrough with Mario and the MG Group to discuss the association records, financing requirements, and potential issues for a specific Chicago condo.
