SB 326 and California Condo Mortgages: The Complete 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. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.

Financing a condo in California means two approvals: yours, and the building’s. Your lender looks at your income and credit, then separately reviews the HOA — its budget, reserves, insurance, repairs and lawsuits. Since 2025, California’s SB 326 balcony inspection law has been feeding directly into that building review, and Fannie Mae’s August 2026 rule changes made the review stricter.

This guide covers what SB 326 requires, how it affects your loan, what changed in 2026, and the financing options I use when a building doesn’t qualify for a standard loan — which is exactly when most banks stop returning calls.

What Is SB 326?

SB 326, codified as California Civil Code §5551, was passed in 2019 after the 2015 Berkeley balcony collapse. It requires HOAs in buildings with three or more attached units to inspect exterior elevated elements — balconies, decks, walkways, stairways and their railings and supports — that are supported in whole or substantial part by wood and have a walking surface more than six feet above ground.

• Who inspects: a licensed structural or civil engineer, or an architect.
• How much: a statistically significant sample — enough units to give 95% confidence with a margin of error no greater than ±5%.
• Deadline: the first inspection was due by January 1, 2025. After that, every nine years, coordinated with the HOA’s reserve study. Buildings permitted after January 1, 2020 must be inspected within six years of their certificate of occupancy.
• Immediate threats: if an element poses an immediate threat to safety, the inspector reports it to the HOA right away and to local code enforcement within 15 days, and the HOA must block access until repairs are inspected and approved.
• Records: the report must be stamped or signed, presented to the board, incorporated into the reserve study, and kept for two inspection cycles.

SB 326 applies to condos and other HOA communities. Rental apartment buildings fall under a separate law, SB 721, with different deadlines — see SB 721 vs SB 326.

How SB 326 Affects Your Mortgage

The inspection itself doesn’t disqualify a building. What matters is what it finds and what the HOA does about it. Under Fannie Mae’s rules, a project is ineligible if it needs critical repairs that haven’t been completed — including material deficiencies that could lead to a failure within a year, water intrusion or mold, advanced deterioration, and unfunded repairs costing more than $10,000 per unit that should be done within 12 months. Structural balcony and walkway findings often fall into that category.

When a building is ineligible, every unit is affected — not just the ones with balconies. A buyer with perfect credit still gets declined for a conventional loan.

What Changed in 2026: Fannie Mae’s Condo Rules

Fannie Mae announced project review changes in Lender Letter LL-2026-03, and Freddie Mac aligned its rules:

• Limited Review is gone for applications dated on or after August 3, 2026 (Freddie Mac’s Streamlined Review too). Most projects of 11 or more units now require a Full Review. Projects of 2–4 units, detached condos, and 5–10 unit projects not in a master association can use a Waiver of Project Review.
• Reserves: Full Review requires at least 10% of assessment income budgeted to reserves, rising to 15% starting January 4, 2027. Reserve studies must fund the highest recommended amount; the baseline funding method is no longer accepted.
• Insurance: master policy deductibles capped at $50,000 per unit starting July 1, 2026.
• Investor concentration: the limit on investor-owned units in established projects was retired — a rental-heavy building isn’t ineligible for that reason alone.

Full details: Fannie Mae’s August 2026 condo rule change.

Video: SB 326 and California condo financing, with Michael DiVita.

Condo Loan Options in California

Conventional (Warrantable Condos)

If the building passes project review, you can use a standard conventional loan with as little as 3–5% down for a primary residence, and mortgage insurance below 20% down. In 2026 the conforming limit is $832,750 in most counties and up to $1,249,125 in high-cost counties — San Francisco, Marin, Los Angeles, Orange and most of the Bay Area are at that ceiling, while San Diego is $1,104,000. Warrantability and loan size are separate questions: a condo under the conforming limit can still need a portfolio loan if the building doesn’t qualify. See 2026 conforming loan limits by county.

FHA and VA

FHA requires the project to be FHA-approved, or the unit to get single-unit approval if the project meets HUD’s requirements; single-unit approvals are capped at 10% of a project’s units (two units in projects under 10). VA requires VA project approval, which a lender can request. Both are worth checking for buyers with smaller down payments — and both still need the building’s repairs and finances in order. See FHA loans and VA loans.

Jumbo Condo Loans

Above the conforming limit, jumbo lenders apply their own condo reviews, which are often similar to Fannie Mae’s. Some jumbo and portfolio lenders are more flexible on specific building issues. See jumbo loans in California.

When the Building Doesn’t Qualify: Portfolio and Non-QM

This is my niche. Portfolio lenders keep the loan on their own books and write their own building rules; non-QM lenders add flexibility on income documentation too. Between them, I can often finance units in buildings with repairs funded and underway, non-structural litigation, commercial space over 35%, or other issues. Expect a higher rate than conforming and a larger down payment — commonly 20–25% — and know that some non-warrantable lenders have their own SB 326 restrictions, particularly for open safety findings or structural litigation. Knowing which lender accepts which issue before the file is submitted is most of the job. More in my non-warrantable condo guide.

DSCR Loans for Investors

Buying a condo to rent out? A DSCR loan qualifies on the rent, and some DSCR lenders accept non-warrantable projects if there are no open life-safety restrictions.

Bridge Financing and Other Equity

If you own a home with equity, a HELOC or bridge loan can fund a cash purchase; once the building’s repairs are done, you can put a conventional loan on the condo.

Refinancing a Condo With SB 326 Issues

Refinances go through the same project review. If your building has open critical repairs, a conventional refinance will likely be declined. Your options:

• Portfolio refinance — usually needs more equity than a conventional refinance, and more still for cash-out.
• Small-project waiver — if the project has 10 or fewer units and isn’t in a master association.
• Wait — if repairs are close to finished, waiting until they’re documented can get you conventional pricing. I’ll price both paths so you can compare.

Special Assessments

Repairs found in SB 326 inspections are often paid for with special assessments. The lender has to document each one — purpose, amount, remaining balance and completion date — and an assessment tied to an unremediated critical repair makes the project ineligible. If you’re buying, the assessment is negotiable: sellers can pay their share at closing, split it, or reduce the price. If you own, see ways to pay an HOA special assessment.

Regional Notes

• San Francisco: large stock of older and mixed-use buildings, so reserves, commercial space and litigation come up often. Many SF “condos” are actually TICs (tenancy-in-common), which need specialized fractional TIC loans from a small group of lenders, not condo mortgages. See my San Francisco mortgage page.
• Los Angeles and Orange County: lots of 1970s–1990s wood-frame buildings with exterior walkways — prime SB 326 territory. Coastal buildings also see accelerated balcony deterioration.
• Oakland and the East Bay: older attached stock and converted buildings; check both the inspection and the reserve study.
• Marin County: smaller condo market with high prices; Sausalito and waterfront buildings deal with moisture and hillside construction. See Marin mortgages.
• Palm Springs: many condos sit on tribal leased land and some operate like condotels, which adds two more layers of lender review. See Palm Springs leased land and condotel mortgages.

Is There an “SB 326 Approved Lender” List?

No. SB 326 is a building inspection law, not a lender certification program, and no official list of “approved lenders” exists. What matters is whether a particular lender’s condo guidelines accept your particular building. As a broker with access to 40+ wholesale lenders, I can check that across several lenders at once.

Buying a California Condo: My Checklist

1. Get pre-approved on your own finances first.
2. Once you have a building in mind, send me the address and HOA name.
3. Request the HOA package early: budget, reserve study, master insurance declarations, SB 326 report, two years of board minutes, and any special assessment notices.
4. I review the building and match you with the right loan — conventional, FHA, VA, jumbo, portfolio or non-QM — before you remove contingencies.
5. If the building has an open issue, we price the alternatives and use it in your negotiation.

Frequently Asked Questions

Does SB 326 apply to all California condos?

It applies to HOA buildings with three or more attached units that have wood-supported balconies, decks, walkways or stairs more than six feet above ground. Detached homes, duplexes and buildings without such elevated elements aren’t covered.

Does a failed SB 326 inspection make a condo non-warrantable?

If the inspection finds structural deficiencies that aren’t repaired, they typically count as critical repairs, which make the project ineligible for Fannie Mae until the work is completed. Minor findings with repairs funded and scheduled are often acceptable.

What changed for condo loans on August 3, 2026?

Fannie Mae retired Limited Review and Freddie Mac retired Streamlined Review. Most projects of 11 or more units now need a Full Review, while small projects can use a Waiver of Project Review. Reserve requirements rise from 10% to 15% for Full Reviews starting January 4, 2027.

Can I still buy a condo in a building with SB 326 problems?

Yes. Portfolio and non-QM lenders can finance many of these buildings, usually with a larger down payment and higher rate. Investors can also use DSCR loans. Some lenders exclude open safety findings, so the right lender match matters.

Can I refinance my condo if SB 326 repairs are pending?

A conventional refinance will likely be declined if critical repairs are open. A portfolio refinance is usually possible with enough equity, or you can wait until repairs are completed and documented.

Is there a list of SB 326 approved lenders?

No. SB 326 is an inspection law, not a lender program. Each lender sets its own condo guidelines, so a broker who can check several lenders is the fastest way to find one that accepts your building.

Will the building become financeable again after repairs?

Usually. Once repairs are completed and documented, and the project meets the reserve, insurance and litigation requirements, it can be reviewed again for conventional financing.

Related Resources

• Fannie Mae’s August 2026 Condo Rule Change
• Non-Warrantable Condo Mortgages
• HOA Special Assessment Loan Options
• SB 721 vs SB 326
• Condotel Mortgages
• Palm Springs Leased Land Mortgages
• 2026 Conforming Loan Limits in California
• San Francisco Mortgage Broker