By CJ Kerls | Branch Manager / SVP of Mortgage Lending | NMLS #243438
Rate | San Francisco, CA | Serving the Bay Area and Sonoma County

Your Mortgage Was Approved. Your San Francisco Condo Building May Not Be.

You can have excellent credit, strong income, plenty of assets, and a fully underwritten mortgage approval. Then the lender reviews the condominium project and the transaction changes.

That is the San Francisco condo paradox: the buyer qualifies, the unit appraises, but the building creates a financing problem.

I’m CJ Kerls, a mortgage lender with Rate in San Francisco. With 35+ years of lending experience, I have learned that condo buyers are often prepared for personal underwriting and unprepared for project underwriting. They know the lender will review their income, credit, assets, and employment. They may not realize the lender will also review the condominium project, including the homeowners association’s finances, insurance, litigation, assessments, inspections, and physical condition. The exact scope and documents depend on the loan and review path, but a strong borrower file does not eliminate the building review.

This distinction became even more important in August 2026, when Fannie Mae and Freddie Mac changed several condominium review paths and reserve-study standards. Some qualifying small projects gained flexibility, while other transactions now require deeper review. A separate reserve-allocation change is scheduled for January 2027. The practical lesson is simple: buyers, sellers, agents, and homeowners associations need to identify building-level risk earlier.

Key Takeaways

Buyers should review the building before waiving contingencies, including its budget, reserve information, master insurance, special assessments, litigation, inspection reports, and recent homeowners association minutes.
A condo mortgage requires two approvals, whether the financing is conforming, high-balance conforming, or jumbo: the borrower must qualify, and the condominium project must meet the selected investor’s requirements.
A jumbo loan does not eliminate project review. Jumbo lenders often begin with agency-style standards and then apply their own overlays.
A different lender can sometimes solve an investor or review-path mismatch, but it cannot make an unsafe, underinsured, or poorly documented building less risky.
A prior closing in the building is useful history, not a current approval. Insurance, reserves, repairs, litigation, lender requirements, and agency rules can change.

“Your preapproval answers whether you can borrow. It does not answer whether the building can be financed.”

The Two Approvals Behind a Condo Mortgage

When you buy a single-family home, the lender primarily underwrites you and the property. A condo adds another subject: the project.

You are not only buying the space inside the unit. You are also buying an interest in a shared financial and physical system. The roof, exterior, foundation, elevators, garage, common plumbing, master insurance, reserve account, and major repair decisions may belong partly or entirely to the homeowners association, commonly called the HOA.

The borrower review covers income, assets, credit, employment, debts, and the proposed housing payment. The project review addresses a different set of risks:

The HOA’s budget, reserves, and assessment history
Master insurance coverage and deductibles
Critical repairs, deferred maintenance, and inspection findings
Litigation and other potential financial exposure
Delinquent HOA dues or assessments
Commercial use, short-term rentals, and project structure
Whether the lender has enough reliable information to reach a decision

A clean borrower file cannot compensate for a building the lender cannot approve.

What San Francisco Condo Buyers Ask Me Most

Does a non-warrantable condo mean the unit cannot be financed?

No. It means the project or loan does not meet an applicable Fannie Mae or Freddie Mac financing path at that time. A portfolio or specialized lender may have an alternative. Some conditions can be corrected or documented. Others, such as unresolved critical repairs or inadequate insurance, can prevent financing until the underlying problem is resolved.

Can another lender approve a building the first lender declined?

Sometimes. Another lender can help when the first lender imposed an internal overlay, used outdated or incomplete information, lacks the appropriate waiver or exemption, or does not offer a suitable jumbo or portfolio program. Changing lenders is less likely to help when the building has an unresolved safety, insurance, or documentation problem.

If another unit recently obtained financing, is the building still approved?

Not necessarily. The prior transaction may have used a different lender, investor, review path, occupancy type, or set of project documents. A building’s insurance, reserves, litigation, repairs, and agency status can also change. A past closing is worth investigating, but it is not a substitute for current project review.

Does a jumbo loan eliminate condo project review?

No. Jumbo describes the loan amount, not the building’s eligibility. Jumbo lenders still evaluate project risk, and many use Fannie Mae or Freddie Mac standards as a starting point before adding their own requirements. A San Francisco condo can require a jumbo loan and still be warrantable, or require portfolio financing because of the building rather than the loan size.

Can a larger down payment solve a condo approval problem?

Not necessarily. More equity can strengthen the borrower’s transaction, but it does not repair deficient master insurance, resolve critical repairs, complete missing inspections, or supply documents the HOA has not provided. The loan and project still need an eligible path.

What to Review Before You Waive Contingencies

Project review often starts too late. A buyer receives hundreds of pages of disclosures, concentrates on the unit inspection, and assumes the lender will handle the HOA after the offer is accepted.

The better sequence is to identify obvious project risk before the financing deadline begins running. Ask your lender, real estate agent, and, when appropriate, a qualified attorney to help determine which documents matter. The core package commonly includes:

The current HOA operating budget and recent financial statements
The most recent reserve study and funding plan, if available
Master property, liability, fidelity, and flood insurance information, as applicable
The condo project questionnaire or equivalent project information
Recent board and membership meeting minutes
Current and pending special-assessment information
Structural, engineering, balcony, façade, roof, foundation, garage, and other relevant inspection reports
Pending litigation, mediation, arbitration, or construction-defect information
Significant repair details, including whether the work is funded and complete
Delinquent assessment, ownership, rental, commercial-use, and management information

Possessing a large disclosure package does not mean the lender has everything needed. The lender will review the available project information and request more when necessary. If the documentation does not support the required determination, the selected financing may not be available.

A short conversation before an offer cannot always produce a completed project approval. It can still reveal whether the address is familiar, whether a status or prior issue is known, which review path appears likely, and which documents deserve immediate attention.

What Sellers and HOA Boards Can Do

Sellers and HOA boards benefit from the same preparation. A seller can request the current project package before listing. An HOA can maintain lender-ready budgets, insurance records, reserve information, assessment details, inspection reports, evidence of completed repairs, and clear answers about litigation. “Unknown” does not establish eligibility. It tells the underwriter that the question remains unanswered.

Project status can change when the underlying problem is corrected. Fannie Mae reports that since 2022 it has updated the eligibility status of more than 2,000 projects after HOAs or lenders supplied evidence that identified issues had been remedied. An adverse status does not have to be permanent, but somebody must diagnose and resolve the reason for it.

What This Can Look Like in Practice

The High-Rise With a Master Insurance Deficiency

I recently worked with a client purchasing a unit in a large San Francisco condominium project. At the time of application, we requested the supporting documents needed for project approval.

While we waited for the condo package, we completed the borrower underwriting and obtained an appraisal that supported the purchase price. The borrower received full approval subject only to approval of the condominium project.

When our condo department received the project documents, the master insurance information was not sufficient to demonstrate that the policy met Fannie Mae and Freddie Mac requirements. This did not automatically mean the building lacked adequate coverage. It meant the documentation provided did not establish that the requirements had been satisfied.

Our condo department and the HOA’s insurance agency went through several rounds of follow-up before we received the information needed to approve the project. That process took more than a week. Because the project documents arrived late and the insurance follow-up required additional time, we had to obtain an extension of the closing date.

Fortunately, the seller worked with us and the transaction closed. But the delay could have put the purchase at risk. The borrower was approved, and the appraisal was complete. The remaining obstacle was documentation for the building.

That experience is why I want to receive the condominium documents before a buyer enters into contract whenever possible. Listing agents and sellers can also reduce risk by assembling current project and insurance information before bringing a condo to market.

What Lenders Examine in the Building

Lenders focus on conditions that can affect safety, finances, marketability, and the lender’s collateral.

Master Insurance

The HOA’s master policy covers shared property and, depending on the policy, portions of the residential buildings. The lender will evaluate the coverage, insured values, deductibles, and policy terms against the applicable requirements.

Fannie Mae reports that insufficient master property insurance is one of the leading reasons a project receives an ineligible status. In California’s changing insurance market, this deserves immediate attention. The master policy should be included in the initial disclosure package. If it is missing, the buyer should request it.

A buyer’s individual condominium unit owner policy, commonly called an HO-6 or “walls-in” policy, does not cure a deficient HOA master policy. In practical terms, the master policy insures the building structure and common areas, while the HO-6 covers the interior components and personal exposures assigned to the unit owner. The exact boundary depends on the master policy and the HOA’s governing documents.

For mortgage approval, we review the master policy and require an acceptable HO-6 policy from the borrower. I have written separately about why insurance now belongs at the beginning of the mortgage process.

Repairs, Reserves, and Special Assessments

Routine maintenance does not make a project ineligible. Normal roof work or repainting is different from damaging water intrusion, advanced deterioration of load-bearing components, an unsafe balcony, foundation problems, roof failure, or a compromised parking structure.

An appraisal alone is not enough. The project review can include engineering reports, inspection findings, HOA minutes, budgets, reserve information, and documents the appraiser never sees.

Low HOA dues are not automatically a virtue. They can reflect an efficient association, or years of underfunding future work. A special assessment is not automatically fatal either. The lender will examine why it was imposed, whether it is adequately funded, how much remains unpaid, and whether the work addresses an unresolved safety or structural problem.

The useful question is not simply, “How much is in reserves?” It is, “Does the association have a credible plan to meet the building’s expected obligations?”

Litigation, Delinquencies, and Project Use

Not every lawsuit makes a building impossible to finance. A routine collection action is different from litigation involving construction defects, habitability, title, structural concerns, or an exposure large enough to threaten the association. The lender will need enough information to understand the risk.

The lender will also evaluate serious delinquencies in HOA dues or assessments because unpaid obligations can weaken the association and shift costs to the owners who are paying.

Mixed-use buildings, investor-owned units, and short-term rentals are part of the San Francisco market. The lender will examine the amount and nature of commercial space, whether the project operates like transient housing, ownership concentration, and the legal structure. The facts determine whether the issue is acceptable, requires another review path, or prevents the selected financing.

What “Non-Warrantable” Really Means

The mortgage industry commonly calls a condo “warrantable” when the loan and project meet the requirements for sale to Fannie Mae or Freddie Mac. A “non-warrantable” condo does not meet an applicable agency path at that time.

The label sounds permanent and universal. Often it is neither. A building can fall outside an agency path because:

A material eligibility problem exists, such as inadequate insurance, unresolved critical repairs, significant litigation, or hotel-like operations.
A temporary problem needs to be corrected, such as missing documentation, an unfinished repair, or an insurance deficiency.
A different review path, waiver, or exemption may apply.
A lender has an overlay beyond the investor’s minimum requirements.
A different jumbo, portfolio, or specialized program may evaluate the documented project differently.

This is why “the building is non-warrantable” is not a complete diagnosis. The useful questions are which requirement failed, whether the issue is with the project or the financing path, whether it can be corrected, and whether an alternative leaves the buyer exposed to the underlying risk.

Jumbo and Non-Warrantable Are Not the Same Thing

Jumbo Is a Loan Size. Warrantable Is a Building Status.

Jumbo describes the size of the mortgage.
Warrantability describes the project’s eligibility for an agency financing path. Those are separate classifications, and neither answer tells you the other.

Many jumbo lenders use agency project standards as a starting point and then apply their own overlays. Other portfolio investors will consider some projects outside agency requirements. Neither approach eliminates project underwriting. Jumbo lenders will still examine insurance, repairs, reserves, assessments, litigation, delinquencies, commercial use, and other shared risks.

This creates a practical San Francisco problem: the lender offering the strongest jumbo terms for the borrower may not be the lender willing to approve the building. The borrower, loan structure, and condominium project need to fit the same investor before pricing alone becomes meaningful.

That distinction is central to choosing between conforming, high-balance, and jumbo financing in the Bay Area.

San Francisco and Northern California Issues That Deserve Extra Attention

National condo guidelines become more useful when connected to the documents and building types buyers encounter here.

State Law

Civil Code 5551

Periodic inspection of qualifying balconies, decks, stairs and walkways, now part of the seller disclosure package.

City Program

SF Façade Inspections

Required for certain buildings of five or more stories, with additional requirements above fifteen.

Ownership Type

TICs and Newly Converted Condos

A tenancy in common or a planned unit development follows different rules. The title report and governing documents decide whether condo project review applies at all.

California Balcony and Deck Inspection Reports

California Civil Code Section 5551 applies to condominium buildings containing three or more attached multifamily dwelling units. It requires periodic inspection of qualifying exterior elevated elements for which the association has maintenance or repair responsibility. These can include wood-supported balconies, decks, stairs, and walkways with walking surfaces more than six feet above ground level.

The inspection requirement does not by itself make a project difficult to finance. The lender will review what the report says, whether it identifies an immediate safety threat or needed repairs, how the work will be funded, and whether the association can document completion.

Senate Bill 410, effective January 1, 2026, also made the most recent Section 5551 report part of the statutory seller disclosure package for applicable condominium sales. Buyers should read it before treating a balcony, deck, or exterior stairway as a minor inspection detail.

San Francisco Façade Reports

San Francisco has a Building Façade Inspection and Maintenance Program for certain buildings that are five or more stories and of specified construction types. Buildings of fifteen or more stories can have additional requirements.

The existence of a required inspection is not itself a financing problem. The lender will care whether the report identifies unsafe conditions, significant deferred work, or repairs that could affect the HOA’s budget, reserves, insurance, or assessments. In an older high-rise, the façade report can be as important as the reserve study.

TICs, Townhomes, and Newly Converted Condos

A tenancy in common, commonly called a TIC, is not a condominium simply because the unit looks and functions like one. TIC buyers generally purchase a fractional interest in the entire property and use a separate financing structure.

“Townhome” describes an architectural style, not necessarily the legal ownership. An attached Bay Area home can be a condominium, a planned unit development, or fee-simple property. The preliminary title report, condominium plan, and governing documents determine whether condo project review applies.

A newly converted condominium can also receive a different review from an established project even when the San Francisco building is decades old. The lender will evaluate the conversion documents, completion status, unit sales, owner control, and other applicable new-project requirements. A prior life as a TIC does not create an established condo financing history.

What Changed for Condo Financing in 2026 and 2027

The recent agency changes matter, but they are best understood as three practical shifts.

The Former Abbreviated Reviews Were Retired

For applications dated on or after August 3, 2026, Fannie Mae retired Limited Review and Freddie Mac retired Streamlined Review. A project that previously used one of those abbreviated routes now needs another eligible path, such as Full Review, an applicable waiver or exemption, reciprocal review, or another financing channel.

This does not mean every condo receives the same full review. It means the lender must identify and complete the correct current path.

Reserve Standards Became More Demanding

When a reserve study is used to demonstrate reserve adequacy, Fannie Mae and Freddie Mac now require the project budget to include the study’s highest recommended reserve allocation.

The 15 Percent Reserve Change

For applications dated on or after January 4, 2027, the standard replacement-reserve allocation increases from 10 percent to 15 percent of annual budgeted assessment income, for specified Fannie Mae and Freddie Mac review paths.

This is not a requirement that every California homeowners association hold cash equal to 15 percent of its annual budget. California Civil Code Section 5550 sets separate reserve-planning requirements. State law and mortgage eligibility overlap, but they are not the same test.

Some Small Projects Gained Flexibility

Fannie Mae expanded its Waiver of Project Review to certain new and established projects with ten or fewer units. Freddie Mac expanded its Exempt from Review option to certain projects containing two to ten units. Additional conditions can apply, particularly when a five-to-ten-unit project is part of a larger development or master association.

Small does not automatically mean exempt, and exempt does not mean that safety, insurance, property condition, or basic eligibility no longer matter. For San Francisco’s small condominium buildings, the correct question is whether the specific loan and project qualify for the current small-project path.

The Bottom Line

The most dangerous condo financing problem is not always a building that clearly fails. It is a building nobody investigates until the buyer is already in contract.

San Francisco condo buyers should treat project review as part of mortgage preparation, not as an administrative task that begins after the appraisal. The borrower and the building are different underwriting subjects. Both need a viable path.

The 2026 and 2027 changes make early review more important, but the agency rules are not the central story. The central story is that the listing, HOA dues, down payment, loan size, and prior closing do not tell you whether the current transaction will work.

If you are considering a San Francisco condo, especially one with litigation, a special assessment, older building systems, mixed use, short-term rentals, a complicated master policy, or a small volunteer-run HOA, bring the project into the lending conversation early. The goal is not simply to find a lender willing to say yes. It is to understand what the lender is approving, which rules control the transaction, and whether the financing solution addresses the actual risk.

A cash purchase removes the immediate mortgage approval requirement, but it does not remove the building risk or guarantee that a future buyer will obtain financing. The same project questions can affect assessments, insurance, safety, refinancing, resale, and the future buyer pool.

Sources

Fannie Mae, Lender Letter LL-2026-03: Updates to Project Standards and Property Insurance Requirements, March 18, 2026.
Freddie Mac, Seller/Servicer Guide Bulletin 2026-C, March 18, 2026.
Fannie Mae, Project Standards Requirements Frequently Asked Questions, March 2026.
Fannie Mae, Condo Status Finder and Condo Project Eligibility Policies, including common ineligibility reasons and project-status remediation information.
Fannie Mae, Condo Buyer’s Guide, 2026.
Freddie Mac, Condominium Unit Mortgage Frequently Asked Questions, including documentation and critical-repair guidance.
Freddie Mac, Condo Project Advisor Frequently Asked Questions, including project review documents and status information.
Federal Housing Finance Agency, Conforming Loan Limit Values, including the distinction between conforming and jumbo loan amounts.
California Legislative Information, Civil Code Section 5550: Reserve Planning.
California Legislative Information, Civil Code Section 5551: Exterior Elevated Element Inspections.
California Legislative Information, Senate Bill 410, effective January 1, 2026.
San Francisco Department of Building Inspection, Administrative Bulletin AB-110: Building Façade Inspection and Maintenance.
California Department of Insurance, Residential Property Insurance Guide, including condominium unit owner and association coverage.
San Francisco Planning Department, San Francisco Housing Inventory 2025, published April 1, 2026.