Selling a D.C. Condo After January 4? The Buyer's Lender Will Read Your Building's Budget

When a buyer's mortgage falls through on a District condo this winter, will the cause be the buyer? For loan applications dated on or after January 4, 2027, the answer may sit in a line of the condo association's annual budget. Few sellers have read that line, and most buyers won't see it until they are under contract.

That date matters more in Washington than in Bethesda or Arlington. Fannie Mae and Freddie Mac are both raising the share of a condo budget that must go to replacement reserves. Their policies also describe an alternative involving a professional reserve study. Maryland and Virginia have required those studies for years. D.C. has not.

A Loan Can Clear the Buyer and Still Fail on the Building

A conventional condo loan gets two reviews. The lender underwrites the borrower, and the lender also reviews the condo project. Until this summer, many established buildings were reviewed under a lighter process. Fannie Mae's Lender Letter LL-2026-03, issued March 18, 2026, retired that Limited Review process. Lenders had to stop using it for loan applications dated on or after August 3, 2026. Since then, established projects are reviewed under Full Review or, when eligible, a Waiver of Project Review.

Freddie Mac moved the same day. Bulletin 2026-C retires its Streamlined Review for applications received on or after August 3, 2026.

This affects a lot of buildings. Dawn Bauman of the Community Associations Institute wrote in March that Limited Review historically accounted for roughly 40% of all project reviews. Many D.C. buildings that used to pass a light check are now getting a full one, and the full one looks at the association's finances.

The Number That Changes on January 4

Full Review already required a minimum reserve allocation. Starting in January, that minimum rises.

Fannie Mae's letter describes the reserve as covering capital expenditures and deferred maintenance. All other replacement-reserve requirements stay the same. Neither agency has postponed the date. Fannie Mae added LL-2026-03 to its Selling Guide in its August 5, 2026 update. Its communications through early November list no further change to the reserve rule. Freddie Mac's Bulletin 2026-6, issued May 6, folded the condo updates into its Guide without moving the January date.

The rule is tied to the date on the buyer's loan application, not the listing date.

The Exception Depends on a Document D.C. Never Required

In its March post, CAI described a reserve-study alternative to the flat 15% test: a study conducted or updated within the last three years, with the budget funding reserves at the study's highest recommended level. Fannie Mae has also tightened how lenders use reserve studies. For applications dated on or after August 3, 2026, lenders must confirm the budget includes the highest recommended reserve allocation. They can no longer rely on the baseline funding method, which lets the reserve cash balance approach zero without falling below it.

Whether a D.C. building has a reserve study depends on how its board chose to operate, because D.C. law does not require one.

The D.C. Condominium Act gives associations the power to adopt and amend budgets for revenue, expenditures and reserves. It does not set a schedule for reserve studies or a minimum funding percentage. The Act's offering-statement section requires a new condominium to disclose whether its projected budget includes a repair and replacement reserve and how much. That is a one-time disclosure, not an ongoing requirement.

Across the District line, the rules are stricter.

A Silver Spring association has been on a five-year study cycle under state law since at least 2022. A Logan Circle association may have a current study, or it may not. The only way to know is to ask, and no public database tracks how many D.C. buildings have one.

A Council Bill Would Require Studies, and It Is Not Law

The D.C. Council is considering a change. Bill B26-0819, the Ownership and Wealth-building for our Neighbors (OWN) Omnibus Amendment Act of 2026, was introduced September 28, 2026 by Councilmember Robert White. As introduced, it would require condominium associations to conduct remaining-life, repair and replacement-cost studies. It went to the Committee on Housing, which held a public hearing on October 22. The markup scheduled for November 2 was canceled.

Even if the bill moves quickly, a new study requirement would not give every building a funded, three-year-current study before January 4. For now, each building's readiness depends on what its board has already done.

The Rule Arrives in a Market With Plenty of Choice for Buyers

For September 2026, Bright MLS reported 5.97 months of supply across all property types in the District, with a median sold price of $660,000, down 2.9% from a year earlier. In Bright's September 2026 condo report for the Washington metro area, active condo listings were up 30.3% from a year earlier and new pending sales were down 18.8%. UrbanTurf noted in October that the metro median gain came largely from more higher-priced single-family sales and fewer condo and townhouse sales.

Local reporting describes the same pattern for condos. In September, a D.C.-based agent told WTOP that only about 13% of the nearly 600 studio and one-bedroom condos listed at the time were under contract. He also said condo prices along the Southwest waterfront may be softening. In August, City Cast DC described a Capitol Hill East one-bedroom that had been on the market for more than 100 days, even after a price cut. Jake Ryon, a senior loan officer at SWBC Mortgage, told the outlet: "The ball is more in the buyer's court today."

Building insurance has been pushing condo fees up across the District, City Cast DC reported. Insurers are tightening what they require, and older buildings are spending more on repairs, reserves and coverage than they used to budget for. A building that raises its reserve allocation to 15% will usually do it by raising dues, and higher dues make each unit harder to afford. In a market where buyers can choose among many listings, a building whose project review raises questions can lose buyers to one that doesn't.

What to Ask for Before the Offer

Questions about a building's finances and project-review history include:

1. What share of the current budget goes to replacement reserves?
2. When was the last reserve study completed or updated?
3. Does the budget fund the study's highest recommended level?
4. Has the board discussed dues increases or a special assessment for 2027? A board that is planning one is likely already drafting the next budget.
5. Has a lender completed a Full Review on this project since August 3, 2026? A recent approval for another unit in the building is useful information. The result for your loan comes from your own lender.

AD Mortgage's Corey Chubner told WTOP in August, "Patience is going to be necessary," and the article noted that some projects may come back non-warrantable.

This post is general information about lending and condominium rules, not legal or financial advice. Your lender, your association and your attorney can confirm how these rules apply to a specific building and loan.

A Few Common Questions

Does the January 4 date apply to a listing or to a loan? To the loan. Fannie Mae ties the 15% requirement to Full Review loan applications dated on or after January 4, 2027, and Freddie Mac ties it to applications received on or after that date.

Where does the lending rule apply? The lending rule is national. Associations in Maryland and Virginia have been operating under state reserve-study requirements.

Is Bill B26-0819 in effect? No. As of its November 2 canceled markup, it was still under Council review and had not passed.

If you own a condo in the District, Teresa Burton can price your unit against the condos it will actually compete with. Request a Free Home Valuation to start with the numbers.