Fannie Mae Condo Reserve Requirements: 10% to 15% Rule

Fannie Mae requires a condo association’s budget to put at least 10 percent of its budgeted assessment income into reserves, and that floor rises to 15 percent for Full Review loan applications dated on or after January 4, 2027. These rules cover the association’s reserve fund, not the cash reserves a buyer has to show a lender.

A lender checks this during Full Review, the project review set out in Fannie Mae Selling Guide B4-2.2-01. A reserve study can stand in for the percentage test only if an independent professional prepared it within three years and the budget funds its highest recommendation.

The Reserve Rule for Condo Loans

Fannie Mae requires a condominium association to allocate at least 10 percent of its annual budgeted assessment income to replacement reserves for capital expenditures and deferred maintenance. This standard applies to any project undergoing the Full Review process under Fannie Mae Selling Guide section B4-2.2-01.

For Full Review loan applications dated on or after January 4, 2027, Fannie Mae Lender Letter LL-2026-03 increases this mandatory reserve contribution from 10 percent to 15 percent of annual budgeted assessment income.

Lenders divide the annual budgeted reserve contribution by the annual budgeted assessment income.

The denominator in this calculation does not simply match gross revenue. Under Fannie Mae rules, lenders may leave these out of annual budgeted assessment income:

• Incidental income that is not part of regular assessments.
• Utility pass-through payments, such as bulk internet or cable billing collected from owners.
• Income directly allocated to reserves.
• Special assessment income collected for specific projects.

Consider an illustrative example with round numbers:

• A 50-unit condominium association drafts an annual operating budget showing $300,000 in total assessments.
• The association also collects $20,000 in bulk cable pass-through charges, bringing total receipts to $320,000.
• Because the cable pass-through is excluded, the annual budgeted assessment income for Fannie Mae’s test is $300,000.
• Under the current 10 percent rule, the board must allocate at least $30,000 per year ($300,000 × 0.10) to replacement reserves.
• Under the upcoming 15 percent rule taking effect in 2027, that required allocation rises to $45,000 per year ($300,000 × 0.15).

If the budget provides less than the required percentage, the lender cannot confirm the budget under Full Review unless the association qualifies under the reserve study option below. To learn how to structure these line items, review our guide on how to create an HOA budget.

Using a Reserve Study Instead of the Percentage Test

A reserve study can be used instead of the flat percentage test only when all of the following requirements are satisfied:

• Independent professional preparation: The study must be prepared by an independent third party that holds specific professional expertise in completing reserve studies. Acceptable preparers include credentialed reserve professionals, construction engineers, or Certified Public Accountants (CPAs) who specialize in reserve studies. A plan prepared by the board never qualifies.
• Three-year recency: The reserve study must have been completed within three years of the date the lender approves the project.
• Highest recommended funding: The association’s current budget must include the highest recommended reserve allocation stated in the study. If the report outlines multiple funding paths, the board cannot adopt a lower or intermediate option to meet Fannie Mae standards.
• Funded reserves match the study: The money actually in reserves must meet or exceed the study’s recommendations.
• Compliance with law and standards: The study must meet Fannie Mae’s requirements and your state’s law. Separately, the Community Associations Institute (CAI) 2023 Reserve Study Standards call for a funding plan covering at least 30 years of projected income and expenses.
• Project file documentation: The lender must retain a copy of the complete reserve study in the project file.

For loan applications dated on or after August 3, 2026, lenders may no longer use the baseline funding method (a plan that aims only to keep the reserve balance from dropping below zero), so a study built on that method cannot stand in for the percentage test.

For additional details on professional report structures, see our explainer on the HOA reserve study.

Policy Updates for 2026 and 2027

Fannie Mae issued Lender Letter LL-2026-03 on March 18, 2026. It changes four parts of project review:

Change	What It Means	Applies To
Minimum reserve allocation	Rises from 10% to 15% of annual budgeted assessment income	Full Review loan applications dated on or after January 4, 2027
Baseline funding	Lenders may no longer use the baseline funding method	Loan applications dated on or after August 3, 2026
Limited Review	Retired; established projects go through Full Review or a Waiver of Project Review	Loan applications dated on or after August 3, 2026
Waiver of Project Review	Now covers projects of 10 or fewer units	Loan applications dated on or after August 3, 2026

Because Limited Review is retired, a lender making a Fannie Mae loan on a project with more than 10 units will check the budget’s reserve line. Freddie Mac and the Federal Housing Administration (FHA) set their own condo project rules. The figures here are Fannie Mae’s only.

For an overview of overall project qualification guidelines, see our article on Fannie Mae condo approval.

Other Fannie Mae Standards Tied to Reserves

Fannie Mae also checks delinquencies, critical repairs and special assessments under Selling Guide sections B4-2.2-01 and B4-2.1-03 when deciding whether a condo project is eligible.

Assessment Delinquency Limits

A condominium association can allocate 15 percent of its budget to reserves on paper, but unpaid dues undermine actual cash collections. Fannie Mae enforces a strict assessment delinquency cap:

• No more than 15 percent of the total units in the project may be 60 or more days past due on their common expense assessments.
• This calculation is based on the total number of units, not the dollar volume of delinquent funds.
• For example, if an 80-unit condominium has 13 units 60 or more days late (16.25 percent), it fails this test because that is over the 15 percent limit.

Critical Repairs and Deferred Maintenance

Selling Guide section B4-2.1-03 defines property conditions that make a condominium ineligible. Unfunded repairs create immediate barriers to mortgage approval:

• Any unfunded repairs exceeding $10,000 per unit that should be completed within 12 months count as critical repairs.
• A project with unfunded critical repairs over this threshold is automatically categorized as ineligible.
• If the association passes a dedicated special assessment that fully funds the work, those repairs are excluded from the $10,000 critical repair calculation.

Special Assessment Scrutiny

Lenders collect these details for each special assessment:

• The purpose.
• The amount.
• The remaining balance.
• The payoff date.

A special assessment raised for a critical repair that has not been fixed makes the project ineligible. To understand owner rights and billing rules regarding supplemental fees, consult our guide to the HOA special assessment.

Steps for Condo Boards to Meet the Requirements

The 15 percent test applies to Full Review loan applications dated on or after January 4, 2027, so the budget in force on that date is the one lenders will check.

Volunteer boards can take four clear steps to meet these rules:

1. Calculate your budgeted assessment income: Review your current accounting statements and isolate assessment revenue from utility pass-through fees, incidental charges, and special assessments. Divide your current annual reserve transfer by this adjusted assessment income. Compare your result against the 10 percent requirement and the upcoming 15 percent standard. For tracking methods, read our guide on HOA reserve fund accounting.
2. Phase in budget increases early: If your current reserve contribution sits below 15 percent, work out the dollar increase now. Full Review loan applications dated on or after January 4, 2027 are tested at 15 percent.
3. Audit your professional reserve study: Check the completion date of your last professional study. If the study is approaching three years of age, contract an independent reserve specialist, engineer, or specialized CPA for an update. Ensure the study calculates a 30-year cash-flow schedule that avoids baseline funding models. You can also check your balance with our guide on how much should an HOA have in reserves.
4. Maintain accurate questionnaire packages: Keep the answers you give on lender condo questionnaires current: the budget, the reserve allocation, and each special assessment’s purpose, amount, remaining balance and payoff date. Boards can prepare these answers with our condo questionnaire toolkit.

If your board wants to run these numbers itself, The HOA Guide’s Reserve Study Builder ($99) lets you list your components and shows your percent funded and a 30-year plan. It is a planning tool, not a professional reserve study, so it does not meet Fannie Mae’s reserve-study criteria.

Boards can also test numbers with our free HOA reserve fund calculator and our downloadable HOA reserve study template.

Bottom Line

Fannie Mae condo reserve requirements demand an annual budget allocation of at least 10 percent of budgeted assessment income today, rising to 15 percent for Full Review loan applications dated on or after January 4, 2027. Relying on an independent reserve study is permitted only if the study was completed within three years, was prepared by a qualified third party, avoids baseline funding, and is funded at its highest recommendation.

Review your current budget allocation against these thresholds, verify that your assessment delinquencies stay at or below 15 percent of units, and schedule an updated professional reserve study if your community needs to deviate from the flat percentage rule.

This page is general information and is not legal advice. For questions about your governing documents or your state’s laws, speak with a licensed attorney in your state.