This regularly scheduled column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. If you would like to work with Eli and his team in Northern Virginia and the greater D.C. Metro area, you can reach him directly at [email protected].
Fannie Mae sets the rules for (most) residential lending and just released new requirements for condo loans. Here’s a link to the full release and I’ll highlight a few changes that have the biggest implications for Arlington/Northern VA condos.
Thanks to the always-on it, Trey Reed of Cross Country Mortgage ([email protected], 703.297.9382), for the notice and helpful explanation on these changes.
Elimination of 50% Investor-Owned (rental) Unit Limits
This rule caused mass confusion for years for condo boards/owners and is now eliminated.
- The actual rule: No second-home or investment loans in buildings with 50%+ units owned by investors (rented), loans for primary residences were always permitted
- What people thought the rule was: No loan of any type in buildings with 50%+ units owned by investors (rented)
Effective Immediately: The 50%+ investor-owned limit is eliminated for ALL loan types.
Why it Matters: This should increase the buyer pool for investor-heavy buildings which is good for values, but may push rental percentages even higher, which most owner-occupants consider a negative.
What to Watch: Many condo buildings with rental caps set them at, or just below, 50% because of this rule (I’m generally opposed to rental caps) so it makes sense that some buildings will drop their rental caps. On the other hand, the elimination of this rule may increase the number of investor purchases and owner-occupants may play defense by adding a rental cap. It’ll be interesting to see how this plays out over the next 2-3 years.
Increased Reserve Allocation to 15%
What Changed: For loan applications dated after Jan 4 2027, condos must budget at least 15% of their total income from assessments (condo fees) toward Reserve contributions.
Background Context: Previously, the requirement was 10%. Reserves are a building’s savings account for the maintenance and replacement of common elements (e.g. HVAC, roof, carpet, paint, parking garage, etc).
Between the Lines: Underfunded Reserves are the biggest financial risks for a condo association; and thus for the banks that lend to its owners. The minimum contribution requirement is an effort by Fannie Mae to reduce this risk exposure.
Why it Matters: This is a nationwide rule, but Arlington/Northern VA condos tend to be in a better financial position, with stronger reserve balances, than many others across the country and do not need 15%+ annual reserve contribution to properly maintain their Reserves. As a result, this rule will force these buildings, that have been financially responsible for years/decades, to increase condo fees unnecessarily to meet the new requirement. This will result in an unnecessarily overfunded Reserve account and put downward pressure on market values because monthly fees are higher.
My Take: This is bad policy. Many financially responsible buildings, with strong existing Reserves, are being punished unnecessarily. Fannie Mae should introduce an exception for buildings that meet a certain Reserve balance threshold relative to the cost schedule forecasted in their Reserve Study.
Less Consequential Changes
There are less consequential (for Arlington/Northern VA) changes Fannie Mae introduced including:
- Lending in buildings with ten or fewer units got easier (in the DMV, this is a big deal for the Washington DC market)
- Limited reviews of Fannie Mae-approved buildings are eliminated; every loan requires a full review (already common)
- Lenders must use the highest recommended Reserve Study cost when assessing whether a building has sufficient Reserves for upcoming projects
- Increased scrutiny of master insurance policies
Do Not Risk Becoming Unwarrantable
If your Association is managed by a large management company (e.g. Cardinal, First Residential, Barkan) you’re most likely already being advised on these changes, but if you are self-managed or managed by a smaller “mom-and-pop” shop, it’s critical that you review the full Fannie Mae release and consult a trusted Residential Loan Officer like Trey Reed of Cross Country Mortgage ([email protected], 703.297.9382) for guidance on what these changes mean in practice and implementation.
Failure to properly adjust to these changes can make your building “unwarrantable” which prevents buyers from securing most loans to buy units in your building. Unwarrantability is a death knell for market values.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at [email protected].
We have access to the most pre and off-market listings across the DMV of any brokerage and are happy to share what’s available with anyone who asks.
Below are some of our team’s pre/off-market listings, details and additional listings available by request:
- Bluemont/Bon Air – 4BR/3BA/1,800 sqft – Detached Single Family (1964) – 6th St N Arlington VA 22205
- Ballston – 4BR/3.5BA/2,400 sqft – Townhouse (2008) – N George Mason Dr Arlington VA 22203
- Ballston – 4BR/3.5BA+office/4,000 sqft – Four townhouses (2026/2027) – 11th St N Arlington VA 22201
- Mclean – 5BR/4.5BA/3,700 sqft – Detached Single Family (2023) – Randolph Rd Mclean VA 22101
- Williamsburg – 6BR/5.5BA/5,500 sqft – Detached Single Family (2026) – 27th St N Arlington VA 22207
- Alexandria VA – 3BR/2BA/1,200 sqft – Detached Single Family (1962, renovated 2021) – Steadman Pl Alexandria VA 22309
Eli and his team believe that your real estate needs should be managed by advisors, not salespeople. Their mission is to guide, educate, and advocate for their clients through real advice, hands-on support, and personalized service.
