SB 326 California Condo Financing Explained [2026 Video Guide]

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Call (800) 239-1103.

California’s SB 326 balcony inspection law is causing real problems for condo buyers and sellers — but most deals can still be saved if you know what lenders actually require. In this video, Michael DiVita of DiVita Home Finance breaks down exactly what SB 326 means for your mortgage, what Fannie Mae and FHA need before they’ll fund a condo loan, and the strategies that are keeping deals alive right now.

What This Video Covers

• What is SB 326? California’s Senate Bill 326 requires HOAs in buildings with three or more units to complete visual inspections of exterior elevated elements — balconies, decks, walkways, and stairs — by January 1, 2025, and then every nine years after that.
• Why it blocks mortgages: Fannie Mae, Freddie Mac, and FHA all require HOAs to be in compliance before they’ll approve condo loans. If an HOA hasn’t completed its SB 326 inspection or has deferred critical repairs, the condo project fails their review — and your loan gets denied.
• The August 3, 2026 Fannie Mae rule change: Fannie Mae tightened its condo project review requirements effective August 3, 2026. HOAs must now provide specific documentation about inspection status and any identified deficiencies. This affects buyers and sellers in projects where inspection is still pending.
• How to check warrantability: We walk through how to pull an HOA’s Condo Project Questionnaire (CPQ) and what red flags to look for before you make an offer.
• Strategies that save deals: From portfolio loans and non-QM financing to project approval workarounds, there are real options — even when an HOA hasn’t finished its inspection yet.

What Is SB 326 and Why Do Lenders Care?

SB 326 was signed into law following the Champlain Towers collapse in Surfside, Florida. California lawmakers moved quickly to require proactive inspections of elevated exterior structures — balconies, stairways, decks, and walkways — in multifamily buildings. The deadline for initial inspections was January 1, 2025.

From a mortgage standpoint, lenders care because Fannie Mae, Freddie Mac, and FHA have all updated their condo project eligibility guidelines to account for SB 326. A condo project with a delinquent inspection, unresolved structural deficiencies, or inadequate reserve funding for repairs can be flagged as ineligible — which means conventional loans won’t close on units in that building until the issues are resolved.

This has created a two-tier California condo market: buildings that completed their inspection and passed, and buildings still working through the process (or that discovered costly repairs). If you’re buying in the second category, you need a lender who understands the workarounds.

The August 3, 2026 Fannie Mae Update

Fannie Mae’s updated condo project review requirements took effect August 3, 2026. Lenders are now required to collect and document HOA responses about SB 326 inspection status as part of the condo project review process. Key items include:

• Whether the HOA has completed its SB 326 visual inspection
• Whether any deficiencies were identified and, if so, whether repairs have been completed or are funded
• Whether the HOA has issued a special assessment related to SB 326 repairs
• Current reserve fund adequacy

If an HOA can’t provide satisfactory answers, the project fails the eligibility review and conventional financing won’t fund. This is why working with a mortgage broker who specializes in condo financing is essential right now — not every lender has updated their processes to handle this correctly.

How to Tell If Your Condo Is Warrantable

A warrantable condo is one that meets Fannie Mae and Freddie Mac’s eligibility guidelines, which means it qualifies for conventional financing at the best available rates. To determine warrantability in today’s environment, you (or your lender) needs to review the HOA’s Condo Project Questionnaire and look for:

• SB 326 inspection completed: The HOA should confirm inspection is done and any deficiencies have been addressed or are funded
• No critical repairs deferred: If the inspection found structural issues and the HOA is postponing repairs, the project is ineligible
• Adequate reserves: Fannie Mae requires at least 10% of the HOA’s annual budget allocated to reserves. Many California HOAs are below this threshold after SB 326 inspection costs
• No pending special assessments related to structural repairs: A large pending assessment signals a financially stressed HOA
• Owner-occupancy ratio: At least 51% of units must be owner-occupied for standard conventional financing

If your condo doesn’t meet these criteria, it’s considered non-warrantable — but that doesn’t mean you can’t get financing. It means you need a different loan product.

Financing Options When SB 326 Is a Problem

Here are the main strategies we use at DiVita Home Finance to keep deals alive when a condo project has SB 326 issues:

1. Portfolio Loans

Portfolio lenders hold loans on their own books rather than selling them to Fannie Mae or Freddie Mac — which means they can set their own condo eligibility rules. Many portfolio lenders will finance non-warrantable condos as long as the buyer has strong credit, solid income, and a reasonable down payment (typically 20–30%). Rates are slightly higher than conventional, but the loan closes.

2. Non-QM / Non-Warrantable Condo Loans

Non-QM lenders specialize in loans that fall outside agency guidelines. For SB 326-impacted condos, non-QM products often allow financing with less restrictive project review requirements. These are real loans with real lenders — they just serve a different risk profile than Fannie/Freddie products.

3. Spot Approval (Limited Review)

For condos in projects with more than 10 units where the buyer is putting 25% or more down, Fannie Mae allows a limited review process (“spot approval”) rather than full project review. This can bypass some SB 326 documentation requirements if the project otherwise meets eligibility criteria.

4. FHA Condo Approval

FHA-approved condo projects have their own review process separate from Fannie Mae. Some buildings that have SB 326 challenges on the conventional side may still qualify for FHA financing — particularly if they’re already on HUD’s approved condo list and have maintained compliance.

Ready to Move Forward on a California Condo?

SB 326 has changed the California condo market significantly, but deals are still getting done. The key is working with a mortgage broker who understands the current Fannie Mae guidelines, knows which lenders will finance non-warrantable projects, and can structure your loan correctly from the start.

Call DiVita Home Finance at (800) 239-1103 to talk through your specific condo. We’ll review the HOA documentation, tell you immediately what loan products apply, and get you moving toward closing.

More SB 326 Resources

We’ve built one of the most comprehensive SB 326 mortgage resource libraries in California. Explore related guides:

• SB 326 Condo Mortgage California — Main Guide
• SB 326 Approved Lenders California
• Non-Warrantable Condo Mortgage California
• SB 721 California Balcony Inspection Mortgage
• SB 326 and Condo Financing in California — What Buyers Need to Know in 2026
• August 2026 Fannie Mae Condo Rule Change — What California Buyers Must Do
• SB 326 San Francisco Condo Mortgage
• SB 326 Los Angeles Condo Mortgage 2026
• SB 326 Oakland & East Bay Condo Mortgage 2026
• SB 326 vs SB 721 — What California Condo Buyers Need to Know
• SB 326 Non-Warrantable Condo Mortgage Options
• Can I Refinance My Condo with SB 326 Pending?
• HOA Special Assessment Loan Options — SB 326 Repair Financing
• SB 326 Special Assessment: Can You Still Get a Mortgage?
• SB 326 Palm Springs Condos: Leased Land + Balcony Inspection
• Non-Warrantable Condos in California — All the Reasons Fannie Mae Says No