Quick Answer: A condo loan has two layers of collateral risk. The first is the unit itself, which the appraiser values. The second is the project around it: the building, the homeowners association, its budget and its legal and physical condition. A unit can appraise well and still sit in a project that Fannie Mae will not accept. That is why lenders need to understand both the appraisal and the project review before a condo file reaches underwriting.
This guide covers how a condo appraisal differs from a single-family appraisal, who is responsible for project review, what makes a project non-warrantable, how FHA treats condos, and what the move to UAD 3.6 means for the condo report.
How a Condo Appraisal Differs From a Single-Family Appraisal
Condo units have traditionally been appraised on Fannie Mae Form 1073, the Individual Condominium Unit Appraisal Report, rather than the Form 1004 used for single-family homes. Our guide to the 1004 appraisal form explains the single-family report for comparison. The condo report values one unit, but the appraiser also reports on the project, including its size, the HOA fees, amenities and the market for units in that type of building.
Comparable sales are usually other condo units, ideally in the same project or in competing projects nearby. The appraiser's job is to value the unit. The appraiser does not decide whether the project is eligible for financing. That decision belongs to the lender.
Project Review Is the Lender's Responsibility
Under Fannie Mae Selling Guide section B4-2.1-01, the lender must confirm that the condo project meets Fannie Mae's eligibility standards before delivering the loan. The lender also has to make sure the information from the HOA and the appraiser is accurate. Fannie Mae lists several ways to review a project:
- Full Review, which the lender completes itself.
- Standard or Streamlined review through Fannie Mae's Project Eligibility Review Service (PERS).
- FHA project approval, for loans that qualify.
- Waived review, which applies to detached units and certain small projects and PUDs.
A Full Review is good for one year for an established project, or 180 days for a new project.
What Makes a Condo Project Non-Warrantable?
"Non-warrantable" is the industry term for a project that does not meet agency standards. Fannie Mae lists the ineligible project characteristics in section B4-2.1-03, last updated in August 2026. Common reasons include:
- Single-entity ownership above Fannie Mae's limits. In projects of 21 or more units, one entity may own no more than 20% of the units.
- Nonresidential or commercial space that exceeds 35% of the project's total space.
- Pending litigation involving the HOA, or developer litigation about safety, structure or habitability, with exceptions for minor matters.
- Operation as a hotel or motel, including projects with "hotel," "motel" or "resort" in the name.
- More than 10% of budgeted HOA income from non-incidental business arrangements.
- Critical repairs, including unfunded repairs costing more than $10,000 per unit that are due within 12 months.
- Timeshares, houseboat projects, continuing care facilities and projects in termination or receivership.
Lenders that keep loans in portfolio can still lend in non-warrantable projects, but those loans will not be sold to Fannie Mae. The appraisal on those files deserves extra care, because the lender is carrying the project risk.
Special Assessments and Critical Repairs
Fannie Mae now asks lenders to look closely at the physical and financial health of a building. For each special assessment, the lender must document its purpose, approval date, original amount, remaining balance and expected payoff date. A project is ineligible if an assessment is tied to an unfixed critical repair, or if a structural inspection completed in the past three years shows critical repairs. A project under an evacuation order is ineligible until the problem is corrected. Once repairs are completed and documented, for example with an engineer's report, the project can become eligible again.
HOA Questionnaires: Forms 1076 and 1077
Much of the project data comes from the HOA or its management company through a questionnaire. Form 1076 is the full questionnaire used for full reviews, and Form 1077 is a shorter version. Freddie Mac uses the matching Forms 476 and 477. Fannie Mae treats Form 1076 as optional but encouraged. Lenders should match the questionnaire answers against the appraisal, since differences in unit counts, owner occupancy or commercial space can signal a problem.
FHA Condo Loans and Single-Unit Approval
FHA has its own condo rules. Its 2019 condominium rule took effect October 15, 2019, set project approvals to last three years and allows single-unit approvals for some units in projects without FHA project approval. HUD Mortgagee Letter 2019-13 limits single-unit approvals to 10% of the total units in a project, and in projects with fewer than 10 units, no more than two units may carry FHA loans. Lenders should check HUD Handbook 4000.1 for the full project requirements before ordering an FHA condo appraisal.
Condo Appraisals Under UAD 3.6
The condo report is changing. Under the redesigned Uniform Appraisal Dataset, UAD 3.6, Fannie Mae and Freddie Mac are retiring legacy form numbers, including Forms 1004, 1073 and 1075, and replacing them with a single dynamic report that covers all property types, including condo units. Broad production began January 26, 2026, and UAD 3.6 becomes mandatory for new GSE appraisal submissions on November 2, 2026. Lenders granted a temporary exception may keep submitting legacy reports for a limited time, and UAD 2.6 is fully retired on June 28, 2027. Our article on UAD 3.6 and the new URAR explains the wider change.
How an AMC Supports Condo Lending
An AMC cannot make a non-warrantable project eligible, but it can make the appraisal side of the file cleaner. That means sending condo assignments to appraisers who know the local condo market, checking that the project data in the report is complete and consistent, and flagging items such as commercial space or HOA concerns before the report reaches underwriting. R3 AMC manages residential appraisals nationwide for conventional, FHA, jumbo and non-QM loans, with more than 500 active appraisers, an average five-business-day turnaround and quality control that combines ValueTest.ai research with human review. R3 AMC was also a preferred beta tester for UAD 3.6.
Frequently Asked Questions
Who decides if a condo project is warrantable?
The lender. Fannie Mae requires the lender to review the project and confirm it meets eligibility standards. The appraiser values the unit and reports project details, but does not approve the project.
What appraisal form is used for a condo?
Condo units have been appraised on Form 1073, the Individual Condominium Unit Appraisal Report. Under UAD 3.6, that form is being retired, and condo units are reported on the single redesigned appraisal report that covers all property types.
What is the commercial space limit for a Fannie Mae condo?
Fannie Mae makes a project ineligible when nonresidential or commercial space exceeds 35% of the total space.
Can you get an FHA loan on a condo that is not FHA approved?
Sometimes. FHA allows single-unit approvals in some projects, limited to 10% of total units under Mortgagee Letter 2019-13. Lenders should confirm current requirements in HUD Handbook 4000.1.
Does a special assessment make a condo non-warrantable?
Not by itself. The lender must document it, and the project becomes ineligible if the assessment is tied to an unfixed critical repair.
Need an appraisal partner? Call R3 AMC at (702) 658-1191 or contact the R3 AMC team.
Key Takeaways
- Condo loans depend on both the unit appraisal and the eligibility of the project.
- Project review is the lender's job; the appraiser values the unit and reports project details.
- Fannie Mae section B4-2.1-03 lists what makes a project ineligible, including commercial space above 35% and unfunded critical repairs.
- FHA single-unit approvals are capped at 10% of a project's units.
- UAD 3.6 retires Form 1073 in favor of one redesigned report and becomes mandatory on November 2, 2026.
- R3 AMC manages residential appraisals nationwide for conventional, FHA, jumbo and non-QM loans. Contact R3 AMC to place an order.
