A buyer can have strong credit, sufficient income and a mortgage preapproval, then discover that the building creates a financing problem. That possibility surprises people who have focused on the apartment’s condition and the buyer’s qualifications. In New York City, where so many purchases involve condos and co-ops, the building deserves attention early in the transaction.
I have seen how a financing question can shift the course of a sale. A lender may be comfortable with the buyer but need more information about the property’s finances, insurance, repairs or ownership structure. Understanding the reason for that question gives everyone a better chance to address it before a mortgage or closing deadline becomes urgent.
Why does a lender review the building?
In a condo, the buyer owns an individual unit and shares responsibility for common areas and building expenses. In a co-op, the buyer purchases shares in the corporation that owns the property and receives the right to occupy an apartment. The forms of ownership differ, but in both cases the buyer’s investment depends in part on the financial and physical health of the larger building.
A lender must evaluate the buyer and the proposed loan. Depending on its mortgage program, it may also review the building’s budget, insurance, outstanding repairs, unpaid charges and other obligations. Personal preapproval does not mean that the condo or co-op has been cleared for financing.
Not every lender uses identical standards. Some loans are made under requirements for sale to Fannie Mae or Freddie Mac, while other banks may keep loans in their own portfolios. If one lender declines a building, the useful first step is to find out precisely why. Another lender may evaluate the issue differently, but a different lender is never an automatic solution.
What changed for condo financing in 2026?
Fannie Mae retired its Limited Review process for loan applications dated on or after August 3, 2026. Established condominium buildings that previously qualified for that process generally must now undergo a Full Review, unless the proposed loan qualifies for a Waiver of Project Review. That can require a lender to examine more of the building’s financial and property information.
A separate reserve change is scheduled for the future. Under Fannie Mae’s current Full Review standard, a condo generally must budget at least 10% of its annual assessment income for replacement reserves, unless it meets the applicable reserve-study alternative. For loan applications dated on or after January 4, 2027, the standard minimum rises to 15%. The 15% requirement is not yet in effect as of September 2026.
Fannie Mae also expanded a possible Waiver of Project Review for qualifying condo buildings with ten or fewer units. That may help some smaller New York buildings, but it has conditions and does not remove every insurance or project requirement. The buyer’s lender needs to determine which review applies to the specific building and loan.
These changes concern condo project review. Co-ops have their own eligibility requirements, so it would be misleading to apply the upcoming 15% condo reserve rule to every co-op in Manhattan.
What can create a problem for a condo buyer?
Lenders may ask for a condo questionnaire, the association’s budget, information about reserves, the master insurance policy and details of any special assessments. They may also review litigation, inspection findings or work that the building has yet to complete. The lender uses that information to determine whether the project meets the requirements of the proposed loan.
A special assessment does not automatically make a building ineligible. The lender needs to understand what the money will pay for, how much remains outstanding and whether the work involves a critical repair. Unresolved safety or structural concerns, significant litigation and inadequate master insurance can present more serious obstacles. A renovated apartment cannot, by itself, answer questions about the building around it.
How is a co-op review different?
A co-op lender reviews a share loan and the corporation that owns the building. Under Fannie Mae’s co-op project guidance, the lender may examine the operating budget, recent audited financial statements or tax returns, reserves, insurance and the building’s underlying mortgage. Sponsor ownership and the co-op’s legal structure can also matter.
New York co-ops may present other questions that are easy to overlook in a listing. A lender may need to understand an approaching maturity date on the building’s underlying mortgage or the effect of an expiring tax benefit on maintenance. If a subsidy or similar benefit is due to end within three years, Fannie Mae directs lenders to evaluate its impact and, where applicable, use the higher future monthly charge when assessing the buyer’s ability to repay.
The co-op board’s approval of a purchaser is also distinct from the lender’s decision. A buyer needs to satisfy the board’s requirements and obtain financing under the chosen lender’s rules. Progress with one does not guarantee the other.
What about unpaid bills and lawsuits?
A building can look beautiful during a showing and still have financial problems that affect a buyer’s mortgage. When owners fall behind on maintenance or common charges, the building has less money to pay its bills and maintain the property. Under Fannie Mae’s guidelines, a condo generally cannot have more than 15% of its units 60 days or more past due on common charges. For a co-op, no more than 15% of owners may be more than 60 days past due on their obligations to the corporation, including each special assessment. A lender will need current figures rather than numbers from an old listing or a prior sale.
It is also important to know whether the building owes property taxes or water and sewer charges. In a co-op, the corporation receives the property tax bill for the entire building. In a condo, a bill owed by one unit owner must be distinguished from a debt affecting the building. Overdue city charges can become liens, so the amount owed, any payment agreement and the plan for bringing the account current all matter. An unpaid bill raises a question for the lender; it does not automatically mean a buyer cannot get a loan.
The same is true of a lawsuit. A minor dispute is different from a claim involving serious defects, unsafe conditions or a large potential cost to the building. The lender may ask what the case is about, whether insurance is covering the defense and what it could mean for the building’s finances. Getting those answers before a buyer commits is far better than discovering the issue when everyone is trying to schedule a closing.
What should buyers ask before committing to a purchase?
Because NYC condo and co-op financing depends on the building as well as the buyer, ask questions while you are still evaluating the apartment. Find out whether owners are behind on maintenance or common charges, the building owes property taxes or water and sewer charges, or there are planned assessments, major repairs, insurance concerns or pending lawsuits. In a co-op, also ask about the underlying mortgage and whether a substantial increase in maintenance is expected.
Give the address and building details to a lender experienced with the type of property you are buying. Ask whether the lender has financed recent purchases there, which documents it will require and when its project review can begin. A prior closing is encouraging, but building conditions and loan rules can change, so it cannot guarantee approval today.
For condos, Fannie Mae’s Condo Status Finder allows associations, management companies and authorized advisers to check for certain identified eligibility concerns. Buyers can ask their lender or association about the project’s status. A result of “no findings” does not mean the building has received Fannie Mae approval; the lender must still complete the review required for the loan.
Your attorney should review the contract and building documents, while your lender assesses the financing. Those roles are complementary. Learning about a potential problem early gives you more time to understand its effect on the purchase and your options.
What should sellers and boards do before a listing goes live?
A seller should gather accurate information about monthly charges, assessments, insurance and major building work from the board or managing agent. If a previous buyer could not obtain a mortgage, ask what the lender actually identified. “The building cannot be financed” may describe a specific loan program, a missing document or an issue that needs action by the building; those are different situations.
Boards and managing agents can help by keeping budgets, financial statements, insurance records, assessment details and repair documents organized and current. When an issue has been resolved, written evidence of the resolution matters. A lender needs to evaluate what has been completed, not rely solely on an assurance that the problem has been handled.
If an obstacle remains, sellers should consider its likely effect on the buyer pool and closing timeline when setting a price and evaluating offers. A cash offer may avoid a mortgage review, but a cash buyer still has good reason to investigate the building. Being prepared with clear answers supports a more credible sale regardless of how the buyer plans to pay.
What if a lender says no?
Ask for the specific reason and whether additional documentation could change the decision. An insurance question may require an updated policy or clarification from the carrier. A repair concern may need completed work and an engineer’s report. Some issues can be documented quickly; others depend on board action and will take longer than a buyer’s anticipated closing schedule.
A buyer can also ask whether a different lender or loan program would consider the building. Portfolio lenders may apply different standards, although their interest rates, down payment requirements and costs may differ. The buyer should compare a genuine written financing option rather than assume another bank will say yes.
NYC condo and co-op financing is ultimately a question about both the household and the building. When buyers, sellers, boards and lenders identify the building questions early, they can make decisions based on the actual obstacle instead of losing time to uncertainty late in the transaction.
📚 Sources and Further Reading
Fannie Mae’s 2026 lender letter explains the August retirement of Limited Review, the small-condo waiver expansion and the reserve requirement scheduled for January 2027. Its condo Full Review guidance and ineligible-project guidance cover building finances and overdue monthly charges.
Fannie Mae’s guidance on ineligible projects addresses repairs, assessments and lawsuits. The New York City Department of Finance explains property tax lien sales and how unpaid property-related charges can become part of a lien. For condo buyers, Fannie Mae’s Condo Status Finder explains who can check a building’s status and what the results mean. A buyer’s lender must determine which requirements apply to the specific building and loan.
📞 Thinking About Buying or Selling in New York City?
The apartment is only part of the story. I’m Brian Phillips, an Associate Real Estate Broker with Douglas Elliman and The MobileBroker®, and I help buyers and sellers examine the building, the monthly costs and the practical steps needed to move a transaction forward.
If you are considering a condo or co-op purchase, or preparing one for sale, connect with me to discuss your plans.
Do you know what a lender would need to learn about your building before approving a buyer’s loan?
