How a Condominium Project Review Works, and Why It Can Hold Up a Loan

A condominium project review is a separate underwriting process that evaluates the association and the property as a whole, not the borrower. Your credit, income, reserves, and equity are reviewed on one track. The building's finances, insurance, ownership mix, and legal exposure are reviewed on another, and both have to clear.

The logic is straightforward once you see it. When you own a condo, you own your unit plus an undivided share of a shared entity, and that entity has its own budget, its own liabilities, and its own insurance. If the association is underfunded or in litigation, the value of the collateral behind your loan is exposed to problems you personally cannot control.

This is why an obviously strong borrower can still hit a wall. The review is not a judgment about you. It is the lender asking whether the shared asset behind your unit is financially sound enough to lend against.

The condo questionnaire is a standardized form sent to the HOA or its management company, and it asks for facts the association already knows but rarely publishes. Most of the questions cluster into a handful of areas, and each one maps to a specific risk the lender is trying to size.

Common items include: what percentage of units are owner-occupied versus rented; whether any single person or entity owns more than a set share of the units; how many owners are delinquent on dues; how much the association holds in reserves and what percentage of the annual budget goes into them; whether the project is involved in any litigation; whether the association controls all common elements and amenities; and whether there is any commercial or short-term-rental component in the building.

The form also confirms insurance. The lender wants proof of a master hazard policy with adequate coverage, liability coverage, and fidelity or crime coverage where the association handles significant funds. In some projects, flood or earthquake coverage comes into it too.

Most condo review delays are logistical, not substantive. The single most common cause is simply that the questionnaire is sitting in a management company's queue. Many management companies charge a fee to complete it and process requests on their own schedule, which can run days or weeks regardless of how urgent your closing timeline is.

The second category is an answer that raises a question. Deferred maintenance disclosed on the form, a pending special assessment, an unusually high delinquency rate, active litigation, or reserves below a threshold can each trigger a request for more documentation: budgets, meeting minutes, engineering reports, or a description of what the litigation involves.

Since the 2021 Surfside collapse, structural integrity and deferred maintenance questions have received substantially more scrutiny across the industry. A project that financed easily several years ago may face additional questions today, and that surprises owners more than anything else in the process.

Not every condo loan gets the same depth of review. A limited review examines a narrower set of questions and is generally available when the loan carries more equity cushion relative to the value of the unit. A full review examines the association's budget, reserve funding, insurance, and legal status in detail.

For an owner refinancing with meaningful equity, this distinction is worth understanding early, because the amount of equity in the transaction can influence which review path applies and therefore how much documentation the association has to produce. Some projects also carry a prior approval status with an agency, which changes the analysis again.

There is also a category of projects that are simply non-warrantable, meaning they do not meet conventional agency guidelines for reasons like heavy investor ownership, a large commercial component, or unresolved litigation. Those projects are not unfinanceable, but they move into a different lending channel with different terms. Knowing which category a building falls into before an application is underway saves the most time.

You can learn most of what the review will surface without waiting for a lender to ask. Association budgets, reserve study summaries, insurance certificates, and board meeting minutes are typically available to owners on request, and reading them tells you how the questionnaire is likely to come back.

The items worth checking first: how funded the reserves are, whether a special assessment has been discussed, whether the association is in litigation, and roughly how much of the building is renter-occupied. If any of those look complicated, that is a conversation to have at the front of the process rather than at the end.

It also helps to know who completes the questionnaire for your project and what they charge, because that single contact often determines the timeline more than any underwriting decision does.