Buying a Condo or Townhome in Sacramento: Warrantability, HOAs, and the 2026 Rule Changes
When you buy a condo, the lender approves two things: you, and the building. If the homeowners association fails project review, the loan dies — even with perfect credit and 30% down. Fannie Mae and Freddie Mac issued coordinated updates in March 2026 that make this harder, retiring the streamlined Limited Review for larger established projects as of August 3, 2026 and raising minimum reserve funding from 10% to 15% of annual assessment income for applications dated on or after January 4, 2027. If a Midtown loft or a Campus Commons condo is on your list, the HOA’s financials now matter as much as your own.
Condo, Townhome, or PUD? The Distinction That Decides Everything
This trips up more Sacramento buyers than any other single issue, and it is worth thirty seconds of your attention.
• Condominium: You own the airspace inside your unit. The association owns the structure, the land, and the common areas. Full project review applies.
• Planned Unit Development (PUD): You own the structure and the land beneath it. There is still an HOA and still dues, but lenders do not run the same project review.
Here is the practical part: a huge share of Sacramento-area properties marketed as "townhomes" are legally PUDs, not condos. Many attached homes in Natomas, Elk Grove, Folsom, and Rancho Cordova fall into this category. If yours is a PUD, essentially none of the warrantability drama below applies to you.
Do not rely on the listing description. Check the legal description and the title report.
The Warrantability Checklist
A condo project is warrantable when it satisfies every item on the conventional financing checklist. Fail one and the entire building becomes non-warrantable — for every unit owner, not just you.
Requirement
The Standard
Why It Exists
Reserve funding
At least 10% of annual budgeted assessment income, rising to 15% for Full Review applications dated on or after January 4, 2027
Underfunded reserves mean deferred maintenance and surprise special assessments
Delinquencies
Fewer than 15% of units 60 or more days behind on HOA dues
Widespread nonpayment signals a failing association
Single-entity ownership
No single entity owning more than 20% of units in a project of 21 or more units
Concentrated ownership concentrates risk
Presale
At least 50% of units sold or under contract
Applies to newer projects still selling out
Master insurance
Replacement cost coverage, with the per-unit deductible capped at $50,000 effective July 1, 2026
A deductible larger than owners can absorb is not real coverage
Commercial space
No more than 35% of the project
Mixed-use projects carry commercial risk the agencies limit
Litigation and structural integrity
No pending litigation or deferred maintenance threatening safety or viability
The post-Surfside emphasis on structural condition
Special assessments
Reviewed for cause, size, and whether the association can fund obligations
A large open assessment signals reserves failed to do their job
A note on what got easier: the 50% investor concentration limit was retired in March 2026. Projects with a high share of rentals — common in Sacramento’s older complexes — are no longer automatically disqualified on that basis alone. The single-entity rule is separate and still applies.
What Changed in 2026, and What It Means for You
Limited Review is going away
Limited Review was the streamlined path — a shorter questionnaire, fewer documents, faster answers. For established projects with more than ten units, that path closes for applications dated on or after August 3, 2026. Every file in those communities moves to Full Review, which means the lender examines the budget, reserve funding, insurance, delinquency rates, litigation, special assessments, and inspection reports.
Practical effect: condo escrows will take longer and require more from the HOA. Order the condo questionnaire and the HOA financials the week you open escrow.
Reserves are going up
The minimum reserve allocation rises from 10% to 15% of annual budgeted assessment income for Full Review applications dated on or after January 4, 2027. There is an important exception: if the association has a reserve study completed within the last three years by an independent qualified professional, the lender can rely on that study — but the budget must fund the highest recommended allocation in it.
For a lot of older Sacramento associations, meeting that threshold will mean raising dues or levying an assessment. Expect to see it happen over the next eighteen months. If you are shopping condos, read the board minutes.
dated rule changes
The rules described here reference Fannie Mae and Freddie Mac coordinated updates issued March 18, 2026 (Fannie Mae Lender Letter LL-2026-03). Confirm no subsequent amendment before publishing.
Key effective dates: Limited Review retirement for established projects over 10 units — applications dated on or after August 3, 2026. Reserve funding increase to 15% — applications dated on or after January 4, 2027. Master insurance per-unit deductible cap of $50,000 — effective July 1, 2026.
The 50% investor concentration limit was retired effective March 18, 2026. Verify current status.
This post will need a scheduled review in December 2026 and again in January 2027 as these dates pass.
Your Loan Options for a Sacramento Condo
Loan Type
Project Approval Path
Notes
Conventional
Full Review or, until August 3, 2026, Limited Review for eligible projects
The most common path. Down payments start at 3% for eligible first-time buyers.
FHA
The project must be on the FHA-approved condo list, or qualify through single-unit approval
Single-unit approval lets an individual unit be financed in a project that is not approved as a whole — a genuinely useful workaround.
VA
The project must appear on the VA-approved condo list
Zero down on an approved project. Worth checking the list before you fall in love with a unit.
Non-warrantable / portfolio
No agency project review — the lender holds the loan
Larger down payment and a higher rate, but it is the answer when a building genuinely cannot qualify.
Where Condos Make Sense Around Sacramento
Condos and attached homes are the affordable entry point into neighborhoods that are otherwise out of reach. Midtown and Downtown put you inside the grid at a price a detached home in the same ZIP code will never match. Campus Commons offers mature landscaping and river access. Natomas, Folsom, and Rancho Cordova have newer attached product — much of it PUD rather than condo, which simplifies financing considerably.
The one thing to watch is the total monthly cost. A $340,000 condo with $580 in monthly dues carries roughly the same payment as a $420,000 house with none. Run the all-in number, not the purchase price.
Questions to Ask Before You Write an Offer
• Is this legally a condo or a PUD?
• What are the monthly dues, and what do they include?
• When was the last reserve study, and what percentage of assessment income goes to reserves?
• Are there any special assessments pending, proposed, or recently completed?
• What percentage of units are 60 or more days delinquent on dues?
• Is there active litigation involving the association?
• What is the per-unit deductible on the master insurance policy?
• Is the project on the FHA or VA approved list, if that matters for your financing?
Frequently Asked Questions
What does non-warrantable mean?
It means the condo project fails one or more Fannie Mae or Freddie Mac requirements, so conventional financing is unavailable for any unit in the building. Buyers then need a portfolio or non-QM loan, which typically means a larger down payment and a higher rate.
Can I get an FHA loan on a condo that is not FHA-approved?
Possibly. FHA single-unit approval allows an individual unit to be financed in a project that is not approved as a whole, subject to conditions. It is worth asking about before writing off a building.
Are townhomes financed differently than condos?
Often, yes — and the difference is significant. Many Sacramento-area townhomes are legally planned unit developments, not condominiums. PUDs do not go through the same project review, so financing is much closer to a standard single-family purchase. Confirm the legal designation on the title report rather than trusting the listing.
Do HOA dues count against my mortgage qualification?
Yes. Monthly HOA dues are included in your housing expense for debt-to-income purposes, exactly like taxes and insurance. High dues meaningfully reduce the purchase price you qualify for.
What is changing for condo loans in 2026 and 2027?
Two headline changes. The streamlined Limited Review path retires for established projects with more than ten units, for applications dated on or after August 3, 2026. And minimum reserve funding rises from 10% to 15% of annual budgeted assessment income for Full Review applications dated on or after January 4, 2027.
How long does condo financing take?
Expect longer than a single-family purchase, and expect that gap to widen as Full Review becomes universal. The bottleneck is usually the HOA returning the questionnaire and financial documents, which is outside your lender’s control. Request them the day escrow opens.
Looking at a Condo? Get the Building Checked Before You Get Attached.
The fastest way to avoid a heartbreak in week three is to have the project reviewed early — dues, reserves, delinquencies, insurance, and open assessments — before your contingencies start burning.
It takes one phone call and it can save an entire escrow.
Call or text (916) 794-0777 | thechriskennedyteam.com
The Chris Kennedy Team | Reliant Lending | NMLS #971546. Serving Sacramento, Placer, El Dorado, and Yolo counties. This article is for general educational purposes only and is not a commitment to lend, an offer of credit, or financial, tax, or legal advice. Program terms, guidelines, and rates are subject to change without notice. Equal Housing Opportunity.