What is the new 15% reserve standard and when does it take effect?

Effective January 1, 2027, conventional condo financing will require that an association's reserve contribution represent at least 15% of its net operating budget — up from the current 10% threshold. This change affects Fannie Mae and Freddie Mac loan approvals, which back the majority of conventional mortgages. Associations that fall short in their 2027 budget will face a smaller pool of qualified buyers.

Can a building with low reserves still get condo financing approved?

Yes, in some cases. Buildings that fail the Full Review reserve test may still be eligible for a Limited Review, which bypasses the reserve analysis entirely for certain loan types and occupancy categories. However, this path is changing — as of August 3, 2026, Limited Review is being retired for established condo projects, meaning Full Review with the reserve test will be required for the majority of transactions. A conversation with an experienced condo lender is important before assuming a building is unfinanceable.

New Industry Standard — January 1, 2027

Condo Reserve Funding Calculator

Starting January 1, 2027, a 15% reserve funding standard becomes the industry requirement for conventional condo financing. Budget season starts in a few months — use this tool now to find your number before it matters.

What This Calculator Does — and Who It's For

When a buyer finances a condo purchase, the lender doesn't just underwrite the borrower — it also reviews the building. One of the key tests is whether the condo association's annual budget allocates enough money to reserves. The reserve fund is the association's savings account: money set aside to pay for major repairs and capital improvements without hitting unit owners with a special assessment.

Fannie Mae and Freddie Mac — which back the majority of conventional mortgages — require that a building's reserve contribution meet a minimum percentage of its net operating budget. Buildings that fall short are classified as non-warrantable, which limits buyer financing options, increases costs, and over time can put downward pressure on property values.

The standard is changing. Effective January 1, 2027, the required threshold increases from 10% to 15%. Most associations don't yet know whether their current budget passes. This calculator applies the exact methodology lenders use — including the exclusion of pass-through line items — to give you a precise answer.

This tool is for:

Condo associations and property managers — run your current or draft budget before your financing review
Realtors — check a building's reserve position before advising buyers or sellers
Buyers and investors — evaluate a building's financing eligibility as part of due diligence
HOA board members — understand the gap before the next budget cycle and plan accordingly

Annual Budget

Total Annual Budget

All line items combined — including current reserve contribution

Current Reserve Contribution

The reserve line item already in your budget

Excluded Line Items

Why exclusions matter: Lenders recognize that certain line items are pass-through costs that benefit individual unit owners — not association operations. These are subtracted from the budget before the reserve percentage is calculated, which reduces the reserve amount you actually need.

Bulk Cable / TV / Internet Service

For unit owners — not just common areas or clubhouse

Water / Sewer

Unit-owner portion — replacing individual water bills

Master Association Pass-Through

Amounts collected on behalf of a master or parent association

Other Excluded Pass-Throughs

Only documented unit-owner pass-throughs confirmed excludable by your lender

Caution — "Other" field: Lenders verify every excluded line item against the submitted budget. Only enter amounts here for expenses that are clearly documented as direct unit-owner pass-throughs and that your lender has confirmed are excludable. Adding general operating expenses to reduce your required reserve will produce a misleading result that will not hold up in underwriting.

Reserve Threshold

Lender Requirement:

10% — Current Standard 15% — New Standard (Jan 1, 2027)

The 15% threshold becomes the industry-wide standard on January 1, 2027. Plan for it now during this budgeting cycle.

Results

Enter your Total Annual Budget above to see results.

Not sure where your building stands?

Our underwriting team will review your condo building for free — and give you an honest assessment before you list or accept an offer. No obligation.

Request a Free Condo Pre-Review

Common Questions

A condo association's reserve fund is its savings account — money set aside to cover major repairs and capital improvements without issuing a special assessment. Fannie Mae and Freddie Mac require that a building's annual reserve contribution meet a minimum percentage of its operating expenses. Buildings that fall short may be classified as non-warrantable, which limits the financing options available to buyers in that building and can affect how quickly units sell and at what price.

Effective January 1, 2027, conventional condo financing will require that an association's reserve contribution represent at least 15% of its net operating budget — up from the current 10% threshold. This applies to Fannie Mae and Freddie Mac loan approvals. Associations that fall short in their 2027 annual budget will face a smaller pool of qualified buyers the moment the standard takes effect.

A building with insufficient reserves may be classified as non-warrantable. Buyers cannot use standard conventional financing in a non-warrantable building — they are limited to portfolio loans, non-QM products, or cash purchases, all of which carry higher costs or more restrictive terms. Over time, a smaller pool of qualified buyers puts downward pressure on unit values in that building.

Certain budget line items are treated as pass-through costs that benefit individual unit owners rather than the association's common operations — such as bulk cable or internet service, unit-owner water and sewer charges, and master association dues collected on behalf of a parent HOA. Lenders exclude these amounts from the budget base before calculating the reserve percentage. This reduces the total operating base and therefore reduces the dollar amount of reserves actually required — which is why entering them correctly matters.

In some cases, yes. Buildings that fail the Full Review reserve test may still qualify under a Limited Review, which bypasses the reserve analysis for certain loan types and owner-occupancy categories. However, Limited Review is being retired for established condo projects as of August 3, 2026 — meaning Full Review with the reserve test will be required for most transactions going forward. If your building is below the threshold, the right move is a conversation with an experienced condo lender before assuming the building is unfinanceable.