For years, when a buyer applied for a mortgage, the focus was primarily on the buyer: income, credit, assets, debt and the ability to make a down payment.
That is changing for condominium buyers. Increasingly, lenders are looking beyond the individual borrower, and even beyond the individual condo unit, to evaluate the financial and physical health of the condominium building itself. The changes are largely driven by evolving project-eligibility standards from Fannie Mae and Freddie Mac, which lenders must consider when originating conventional loans intended for those secondary-market channels.
For Alexandria, where many condominium communities are decades old, this is an important development for both buyers and sellers.
It's Not Just the Buyer Being Scrutinized
A buyer can have excellent credit, strong income and plenty of money for a down payment and still encounter a financing problem if the condominium project does not meet the lender's requirements.
The question is no longer simply, "Can this buyer afford the condo?" It may also be: "Is this condominium project financially and physically healthy enough to support the loan?"
Reserves Are Getting More Attention
One of the biggest areas of scrutiny is the condominium association's reserve funding. An important upcoming benchmark is 15% of the association's annual assessment income allocated to replacement reserves, compared with the previous 10% standard. However, this does not mean every condominium must have exactly 15% in reserves to qualify for financing - there are exceptions, including situations where a qualifying reserve study supports a different funding level.
The bigger issue is whether the association is adequately planning and budgeting for future capital expenditures. A healthy reserve account isn't simply about how much money is sitting in the bank today. Lenders are increasingly interested in whether an association has a realistic plan for major future expenses such as roofs, elevators, windows, façades, plumbing and other building components.
That makes a professional reserve study increasingly important. A reserve study evaluates the expected life and replacement costs of major building components and helps an association determine how much it should be setting aside.
There is also an important change coming for associations relying on a reserve study as an exception to the standard funding requirement. For applications received beginning August 3, 2026, Freddie Mac says lenders cannot simply rely on a baseline funding methodology - the highest recommended funding level in the study must be used. For condominium owners, keeping reserve studies current, and following their recommendations, can therefore be critical.
Insurance and Deferred Maintenance Can Become Financing Issues
Insurance is another major piece of the puzzle. Lenders are examining condominium associations' master insurance policies, including whether coverage is sufficient to address the estimated replacement cost of the building improvements. Deductibles and the relationship between the master policy and an individual owner's insurance can also matter.
Then there is deferred maintenance. A building may be attractive, well located and otherwise desirable, but significant unresolved problems can raise questions for a lender - think major roof replacement, structural repairs, waterproofing, façade work or mechanical systems.
If an association knows substantial work is needed but doesn't have adequate funding to address it, that can become more than a problem for the board and homeowners. It can become a financing problem for prospective buyers.
What This Means for Sellers
Don't wait until you have a contract to discover that your building has a financing issue. If you're considering selling, talk with your real estate professional before listing. Review the association's financial statements, reserve information, insurance coverage, special assessments and any known or anticipated major projects.
What This Means for Buyers
When evaluating a condominium, you're not just purchasing the four walls of your unit - you're buying into the financial and physical health of the entire community. A well-managed older building with strong reserves, appropriate insurance and good documentation may actually have a significant advantage over a comparable unit in a financially weaker building.
The Bottom Line
Your buyer isn't the only thing being underwritten anymore - the building is being underwritten, too. And for Alexandria's many condominium owners, that makes reserves, insurance, maintenance and financial planning more important than ever.
The Seward Group is here to help in every way.
Thinking of selling a condo? We can do a forensic look via one of our preferred lenders prior to listing your home.
Thinking of buying a condo? We can do the same due diligence for a buyer so there are no "bad" surprises during the transaction.
Please reach out as we are here to help.
The Seward Group of TTR Sotheby's International Realty sewardgroup@ttrsir.com (703) 298-0562 www.Seward-Group.com
