Condos & Townhomes

Attached homes are financed differently, insured differently, and sold differently than single-family houses. The agency rules governing condo financing changed substantially in 2026, and those changes decide whether a building's units can be bought with a conventional loan at all.

Ask About a Specific BuildingSee the 2026 Changes

Condominium and townhome describe two different things. Condominium is a form of ownership: you own the interior of your unit and an undivided share of the common elements. Townhome describes a building style: an attached home sharing one or more walls. A townhome can be owned as a condominium, or owned fee simple with the land underneath it as part of a planned unit development. Which one you are buying changes your financing, your insurance, and what you maintain.

Current as of August 2026

The 2026 Condo Financing Changes

On March 18, 2026, Fannie Mae and Freddie Mac issued matching updates to their condominium project standards. Two of those changes are already in effect. A third arrives in January.

These rules do not evaluate you. They evaluate the building. A buyer with excellent credit and a large down payment can still be declined because of the association's budget, its reserve study, or an open structural repair. That is the part most people find surprising, and it is why the building's paperwork now matters as much as the unit's condition.

Limited Review is gone

The fast-track review paths — Limited Review at Fannie Mae, Streamlined Review at Freddie Mac — were retired for conventional loan applications dated on or after August 3, 2026. Projects now go through a Full Review, or qualify for a Waiver of Project Review. The trigger is the loan application date, not the closing date. If you are under contract right now, that distinction may decide which standard applies to you, and it is worth confirming with your loan officer today rather than at closing.

Reserve requirements rise on January 4, 2027

For conventional applications dated on or after January 4, 2027, an association will need to budget at least 15% of annual assessment income to replacement reserves, up from 10%. The baseline funding method — allowing reserve balances to run near zero without going below it — is no longer accepted, and where a reserve study is relied upon, the budget is expected to reflect the study's highest recommended allocation.

If you sit on a board, this is a budget-season problem, not a 2027 problem. An association that adopts an underfunded budget this fall can make every unit in the building harder to finance the following January. That affects every owner's resale value, including owners who have no intention of moving.

What loosened at the same time

The 2026 updates were not uniformly stricter. Two changes took effect immediately and help certain buildings:

  • Waiver of Project Review expanded to new and established projects of 10 units or fewer, subject to conditions. Small conversions and small townhome associations benefit here.
  • The 50% investment-property cap was removed for established projects. A separate requirement remains that at least half of total units be conveyed to principal residence or second home purchasers.

What makes a project ineligible

The recurring themes across agency reviews are financial health and physical condition, and they are treated as connected rather than separate. Common obstacles:

Critical repairs

Open structural, safety, or deferred maintenance items — roofs, balconies, elevators, waterproofing — that the association has documented and not resolved.

Underfunded reserves

Reserve allocation below the threshold, or a reserve study whose recommendations the budget does not follow.

Delinquent assessments

Too large a share of owners behind on dues. It signals the association may be unable to fund what it has committed to.

Litigation

Certain pending suits, particularly those involving the structure or safety of the building, will stop a review.

Single-entity ownership

One party owning too many units concentrates risk across the project.

Flagged in CPM

A project marked unavailable in Fannie Mae's Condo Project Manager is ineligible until the underlying issue is resolved.

Two practical consequences. First, ask about the building before you fall in love with the unit. Establishing warrantability early costs nothing and prevents a collapsed contract three weeks in. Second, if a project is non-warrantable, financing usually still exists through portfolio lenders — typically at a higher rate and a larger down payment. That is a real option worth pricing, and it is not the same as being told no.

Agency guidelines change and individual lenders apply their own overlays on top of them. The dates and thresholds above reflect published agency guidance as of August 2026. Confirm what applies to your specific loan and building with a licensed loan officer. Nothing here is lending advice.

Three Ownership Forms, Side by Side

Two identical-looking attached homes on the same street can be owned under entirely different structures. Read the declaration, never the exterior.

 CondominiumTownhome (fee simple / PUD)Co-op
What you own The unit interior plus an undivided share of common elements The structure and the land beneath it Shares in a corporation, plus a proprietary lease on your unit
Exterior and roof Usually the association's responsibility Varies — sometimes yours, sometimes the association's The corporation's
Financing review Full project review under 2026 agency standards Substantially lighter; PUDs avoid most condo project review Specialized lenders; a smaller pool
Your insurance HO-6 walls-in policy over the association's master policy Often a standard homeowners policy Unit-owner policy over the corporation's coverage
Property tax Assessed on your unit Assessed on your parcel Frequently assessed at the corporate level and allocated
Common in this market Yes, widely Yes, widely Rare outside the city

Why this matters more than it used to. Because condo project review tightened in 2026 and PUD review did not, the financing gap between a condo townhome and a fee-simple townhome has widened. Two similar homes at a similar price can now have meaningfully different buyer pools. Confirm which one you are looking at before you write an offer.

What the Assessment Actually Buys

Two units at the same price can differ by hundreds a month once assessments and what they cover are accounted for. The dollar figure alone tells you very little.

Get all of the following in writing before you are past your attorney review period:

  • The current assessment, and the figure from three and five years ago
  • What it includes — lawn, snow, exterior, roofs, water, trash, cable, insurance
  • What it excludes — windows, decks, driveways, HVAC, interior anything
  • The reserve study, its date, and the current percent funded
  • Special assessment history, and anything pending or under discussion
  • The delinquency rate — how many owners are behind, and by how much
  • Rental caps, and whether the cap is currently met
  • Pending litigation involving the association

The document nobody reads

Board meeting minutes for the past twelve months are the single most revealing item in the packet, and they are the one buyers skip.

Financial statements show what has already happened. Minutes show what the board is arguing about right now — the roof bid nobody wants to approve, the elevator that keeps failing, the insurance renewal that came back at double. A special assessment is discussed in minutes long before it appears anywhere else.

Low assessments are not automatically good news. Dues that have not risen in a decade, sitting alongside an aging roof and a thin reserve, describe an assessment that is coming rather than a bargain.

What Illinois and Indiana Require

Illinois — the 22.1 disclosure

Section 22.1 of the Illinois Condominium Property Act (765 ILCS 605/22.1) governs condominium resales. On a prospective purchaser's demand, the seller obtains a defined packet from the association, including the declaration, bylaws and rules; a statement of unpaid assessments and liens on the unit; capital expenditures anticipated in the next two years; the status and amount of reserves; recent financial statements; and any pending suits or judgments involving the association.

Illinois amended the section in 2022 to cap what an association may charge for producing the disclosures, subject to adjustment. Illinois courts have recognized a purchaser's implied private right of action for a failure to comply.

Townhome and homeowner associations that fall outside the Condominium Property Act are generally governed by the Common Interest Community Association Act, which carries a comparable resale disclosure provision at Section 1-35.

Note this is separate from the residential disclosure report required of Illinois sellers generally. A condo sale involves both.

Indiana

Indiana's requirements for condominium and homeowner association resale disclosure differ from Illinois and are less prescriptive about the contents of the packet. What an association must produce, and on what timeline, is worth confirming with an Indiana real estate attorney early rather than at closing.

In practice, Steve requests the same document set on both sides of the state line regardless of what is statutorily required, because the buyer needs the same information either way.

Sellers: start the packet before you list. Associations and management companies take time to produce these documents, and a delay here holds up a closing that is otherwise ready. Requesting them the week you list rather than the week you go under contract removes a predictable problem.

The Insurance Gap Most Owners Do Not Know They Have

Attached-home insurance works in two layers, and the seam between them is where owners get hurt.

The master policy

Carried by the association, covering the building and common elements. Whether it stops at the bare walls or includes original interior finishes depends on the declaration. Those two versions produce very different personal coverage needs.

Your HO-6

Your walls-in policy: interior finishes, improvements, personal property, liability, and loss of use. What it needs to cover is defined by where the master policy stops.

Loss assessment coverage

The one that gets missed. If a covered loss exceeds the master policy, the association can assess owners for the shortfall — including the master policy deductible, which can be substantial. Loss assessment coverage on your HO-6 addresses that exposure, and default limits are often far lower than the realistic risk.

Ask your insurance agent two questions: is the master policy all-in or bare-walls, and what is the master policy deductible. Then set your HO-6 and loss assessment limits against those answers rather than against a default. Insurance costs for associations have risen sharply in recent years, and higher master deductibles have been a common response — which quietly moves risk onto individual owners.

Selling a Condo or Townhome

Marketing an attached home is only half the job. The other half is making sure a buyer's lender can approve the building.

Attached-home sales fall apart at the project review stage more often than at inspection. A listing that has already gathered the association's documents, knows the reserve position, and can answer a lender's questionnaire quickly is a listing that closes.

  • Request the association packet the week the home is listed
  • Know the reserve funding position before a buyer's lender asks
  • Identify any open critical repair item early and disclose it
  • Confirm whether the project is currently flagged in CPM
  • Understand the rental cap, because it shapes your buyer pool
  • Price against comparable attached homes, adjusted for assessment level and what it covers

Steve builds valuations on a 1-mile radius, ±20% square footage, ±1 bedroom and bathroom, and similar age, garage, and basement, with each comparable adjusted individually rather than averaged. For attached homes, the assessment and what it covers is a required adjustment, and skipping it produces a price that looks defensible and is not.

Working the building, not just the unit

Steve has been licensed since 2003 and has closed 615+ transactions across the Chicago southwest suburbs and Northwest Indiana, in both Illinois and Indiana. A meaningful share of those have been attached homes.

That experience matters most in the part of the transaction buyers never see: getting a management company to return a questionnaire, resolving a document request that has stalled, and knowing which lenders will still work with a project that has an open item.

Board members: if your association is heading into budget season and no one has looked at the January 2027 reserve threshold, that is a conversation worth having before the budget is adopted. Steve is glad to have it, whether or not anyone in the building is selling.

615+Transactions closed
$113M+Sales volume
2003Licensed since

Common Questions

What is the difference between a condo and a townhome?

Condominium is a form of ownership; townhome is a building style. In a condominium you own the unit interior and an undivided share of the common elements. A townhome is an attached home sharing walls, and it can be owned either as a condominium or fee simple with the land underneath it. The deed and declaration tell you which, and the exterior does not.

What is a non-warrantable condo?

A project that does not meet Fannie Mae or Freddie Mac eligibility standards, so conventional financing is unavailable for its units. Common causes are underfunded reserves, open critical repairs, high assessment delinquency, certain litigation, and concentrated single-entity ownership. Portfolio lenders often still lend on these projects, generally at higher rates and with larger down payments.

Did condo financing rules change in 2026?

Yes. Fannie Mae and Freddie Mac issued matching updates on March 18, 2026. The Limited and Streamlined Review paths were retired for loan applications dated on or after August 3, 2026, and the minimum reserve allocation rises from 10% to 15% of annual assessment income for applications dated on or after January 4, 2027. The waiver of project review was expanded to projects of 10 units or fewer, and the 50% investment-property cap was removed for established projects.

How do I find out whether a building is warrantable before I make an offer?

A loan officer can check whether the project is flagged in Fannie Mae's Condo Project Manager and can start a project review. It costs nothing and takes far less time than discovering the problem three weeks into a contract. Ask before you write the offer.

Can a condo association's finances stop me from buying, even with strong credit?

Yes. Project review evaluates the building, not the borrower. A strong file can be declined because of the association's reserve funding, an open structural repair, or its delinquency rate. This surprises most buyers, and it is why the association documents matter as much as the unit.

What is a special assessment?

A one-time charge levied on owners for an expense reserves cannot cover — a roof, a parking structure, an insurance shortfall. Amount, purpose, and payment schedule vary. A well-funded reserve reduces the likelihood, and reviewing the reserve study and recent board minutes is the best available warning.

What does a 22.1 disclosure include in Illinois?

On a purchaser's demand, the seller obtains a defined packet from the association, including the declaration, bylaws and rules; unpaid assessments and liens on the unit; capital expenditures anticipated in the next two years; the status and amount of reserves; recent financial statements; and pending suits or judgments involving the association. It is separate from the residential disclosure report Illinois sellers provide generally.

Are rental caps something I should care about if I plan to live there?

Yes, for two reasons. If your circumstances change and you want to rent the unit, the cap governs whether you can. And rental composition affects project review, so the cap indirectly protects the financeability of every unit in the building, including yours at resale.

What areas does Steve serve?

Will, Kendall, Grundy, DuPage, and Cook counties in Illinois, and Lake, Porter, and La Porte counties in Indiana. Steve is licensed in both states and holds the ABR® and SFR® designations.

Ask About a Specific Building

Considering a particular condo or townhome community? Steve will pull what is publicly available on the association, tell you what to request from the board, and flag anything worth checking with a lender before you write an offer.

Selling an attached home, or sitting on a board with a budget question? Same form.

Prefer to talk now? Call or text 630-912-9129.

Get the Building Reviewed

About Constellation Home Sales

Steve Roake and Kimberly Genovese are the partners behind Constellation Home Sales | Freedom Group Global, operating under Keller Williams Preferred Realty in Orland Park.

Steve has been licensed since 2003 and carries licenses in both Illinois and Indiana. Kimberly has been licensed in Indiana since 2004. Together they cover attached homes on both sides of the state line — condominiums, townhomes, and villa communities across Will, Kendall, Grundy, DuPage, and Cook counties in Illinois and Lake, Porter, and La Porte counties in Indiana.

Having two partners on a file matters more on attached homes than on single-family houses. Condo and townhome transactions run on other people's timelines: a management company producing an association packet, a board answering a lender questionnaire, a project review moving through underwriting. Someone has to stay on those items daily while the rest of the transaction keeps moving.

Steve Roake

Licensed real estate broker · Illinois and Indiana

Licensed since 2003, with 615+ transactions closed and $113M+ in sales volume. Steve holds the ABR® (Accredited Buyer's Representative) and SFR® (Short Sales and Foreclosure Resource) designations.

Much of his work involves homeowners in transition — downsizing into an attached home, settling an estate, or relocating across the state line.

Kimberly Genovese

REALTOR® · Licensed in Indiana

Licensed since 2004 and a partner at Constellation Home Sales. Kimberly handles the Northwest Indiana side of the partnership, working Lake, Porter, and La Porte counties.

Northwest Indiana runs on its own MLS, its own disclosure practice, and its own property tax structure. Having a partner who works that market daily is why an Indiana file gets the same attention as an Illinois one.

Ask About a Specific Building

Steve Roake and Kimberly Genovese are licensed real estate professionals, not attorneys, accountants, insurance agents, or mortgage lenders. Nothing on this page is legal, tax, insurance, or lending advice. Consult a licensed real estate attorney regarding association documents and disclosure obligations, a licensed loan officer regarding financing eligibility for a specific project, and a licensed insurance agent regarding coverage.

Agency financing guidelines described here reflect published Fannie Mae and Freddie Mac guidance as of August 2026 and are subject to change. Individual lenders apply their own overlays. Eligibility for any specific project or borrower can only be determined by a lender.