Inherited a Chicago Condo? What Fannie Mae's 2027 Reserve Rule Means for Your Sale

Updated October 2026

If you're settling a loved one's estate, you may suddenly be responsible for a condo you never planned to own — and deciding whether to sell it, keep it, or wait. That's a lot to carry while grieving, and the timing of a sale is usually the last thing on anyone's mind.

There is, however, a change in federal mortgage guidelines taking effect in early 2027 that's worth understanding now. It doesn't change anything about your unit itself. It may change how lenders evaluate the building your unit is in, and that can affect how many buyers are able to get financing to buy it.

What's Changing on January 4, 2027

Fannie Mae sets the rules most conventional mortgages follow. For loan applications dated on or after January 4, 2027, a condo association's budget generally needs to set aside at least 15% of its annual budgeted assessment income for replacement reserves — up from the current 10%.

Replacement reserves are the savings an association sets aside for big future expenses like roofs, elevators, windows, and masonry. Freddie Mac adopted a matching increase on the same date, so the new standard applies across most conventional condo lending.

Here's a simple example. An association that collects $1,000,000 a year in regular assessments currently needs to budget $100,000 toward reserves. Under the new standard, that becomes $150,000 — a 50% increase in the reserve contribution.

A Related Change Has Already Happened

As of August 3, 2026, Fannie Mae retired its streamlined "Limited Review" for established condo buildings with more than ten units. Those loans now go through a Full Review, which looks more closely at the association's budget, reserves, insurance, delinquencies, litigation, and special assessments.

In other words, more Chicago condo buildings are being examined in detail than were a year ago.

Why the Building's Finances Affect Your Sale

Selling a condo isn't only about the unit. A buyer's lender also has to approve the building. If a project doesn't meet the reserve standard (or one of its alternatives), it can become ineligible for conventional financing.

When a building doesn't qualify, buyers using conventional loans may struggle to get financing there. That can mean fewer qualified buyers, more cash or specialty-loan buyers, and potentially more negotiation on price.

Not Every Building Is Affected

This is important. Many associations will be unaffected or will adjust in time:

Buildings already budgeting 15% or more for reserves meet the new standard.
Buildings with a current reserve study have another path. An association can rely on a professional reserve study completed or updated within the last three years instead of the flat 15% — as long as its budget funds the study's highest recommended level.
Small buildings and detached condos are generally excluded. Fannie Mae waives project review for two-to-four-unit condo projects and for detached condo units.

It's also worth knowing that Illinois law doesn't set a specific percentage for condo reserve contributions. A Chicago building can be fully compliant with state law and still fall short of Fannie Mae's new standard.

What Associations May Do in 2027

Boards whose reserves fall below the new threshold will need to decide how to respond. Depending on each association's finances, some may adjust their 2027 budgets, which could mean higher regular assessments or other budget changes. Special assessments generally can't be used to satisfy the required annual reserve allocation, so any adjustment usually has to show up in the regular budget.

We can't predict what any individual association will decide. The only way to know is to look at your building's actual budget and reserve plan.

Why Timing Matters for Estates and Heirs

The rule is tied to the date of the buyer's loan application. A buyer who applies for a mortgage before January 4, 2027 is generally evaluated under the current 10% standard. A buyer who applies on or after that date is evaluated under the new 15% standard.

For an estate, a few practical points are worth weighing:

Preparing a condo for sale takes time. Clearing out a loved one's belongings, handling light repairs, gathering association documents, and confirming the executor's authority to sell can take several weeks.
Carrying costs continue in the meantime. While a condo sits, the estate keeps paying assessments, property taxes, insurance, and utilities.
The 2027 budget is still an open question. If your building is below the new threshold, assessments could change once the new budget is adopted — and higher monthly costs can affect what buyers are able or willing to pay.

None of this means you should rush. If the building is well funded, or the family isn't ready, waiting may be the right choice. But if you were already leaning toward selling, it's worth having the conversation now rather than in January.

What to Request From the Association

Whether you sell now or later, these documents will tell you where the building stands:

The current annual budget, and the proposed 2027 budget if available
The percentage of assessment income going to replacement reserves
The most recent reserve study and the date it was completed
Any pending or planned special assessments
Major repairs or deferred maintenance on the horizon
The association's master insurance coverage
Owner delinquency levels and any pending litigation

If the condo is part of a probate estate, your probate attorney can help confirm who has authority to request these documents and sign a listing agreement. If you don't have an attorney yet, you can browse Illinois probate attorneys on our sister site, Illinois Probate Directory.

How We Can Help

We work with families, executors, and probate attorneys across Chicago and the suburbs to sell inherited homes and condos with as little stress as possible. If you're handling a condo in an estate, we'll help you review the association's budget and reserve position, understand how financing rules could affect your pool of buyers, and coordinate the sale timeline with your probate attorney.

There's no cost and no obligation to talk it through. Schedule a free, confidential consultation.

This article is for general information only and is not legal, tax, or lending advice. Financing eligibility depends on each lender and each condominium project. Buyers should confirm requirements with their lender, and executors should consult their probate attorney before selling estate property.

Andy Rouvalis is a licensed Illinois real estate agent (License #475165248) with HomeSmart Connect, specializing in probate and inherited property sales across Chicago and the suburbs — including condos in estates. He works alongside estate attorneys and helps executors understand how building finances and lending rules affect a sale.