"Which Condo Purchases Skip the Project Review Under Freddie Mac's Rules?"

From the curb, the property looks like one big older home. Inside, it has been split into three condos, each with its own front door, its own deed and its own owner. You love the middle one. And because of how small that building is, the lender financing it under Freddie Mac's guide does not have to study the association's budget and reserves before your loan can close.

Under Freddie Mac's guide, three kinds of condo purchase need no project review at all. They are a unit in a project of two to four units, a unit in a project of five to ten units that is not part of a larger master association, and a detached condo unit. The project still has to carry proper insurance and stay out of a short list of ineligible project types.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. This article is about the condos where most of the usual building review never comes up, and what you still want to confirm before you write an offer.

What is a condo project review?

A lender financing a condo looks at both you and the whole condo project the unit belongs to. Freddie Mac's Section 5701.1 says a project review addresses risks including "The financial stability and viability of the project" and "Project-level litigation."

For a larger established building, that review gets detailed. Section 5701.5 requires that "At least 10% of the budget must provide funding for replacement reserves" among its other tests, and I walk through the rest in what a condo warrantability review checks.

Freddie Mac also has a category where none of that applies. It is called Exempt From Review, and it is Section 5701.7 of the guide.

Which condos are exempt from project review?

Section 5701.7 opens with its own date: "Effective for Mortgages with Application Received Dates on or after August 3, 2026." The section says the mortgage must be one of the following:

• "Secured by a Condominium Unit in a 2- to 4-Unit Condominium Project"
• "Secured by a Condominium Unit in a 5- to 10-Unit Condominium Project that is not part of a Master Association"
• "Secured by a Detached Condominium Unit"
• "A Freddie Mac-owned 'no cash-out' refinance Condominium Unit Mortgage"
• "A Refi Possible ® Mortgage"

The first three are about the kind of condo you are buying. The last two are refinances.

A master association, in the second item, is a larger association a condo project can be part of, and the guide notes it can own "related facilities" of its own.

A note at the end of the section spells out what the exemption buys you. If the Exempt From Review requirements are met, "the Seller is not required to comply with the requirements for any of the other project review types in Sections 5701.5 (Established Condominium Project reviews), 5701.6 (New Condominium Project reviews) and 5701.9 (Reciprocal project reviews)." In Freddie Mac's guide, "Seller" means the lender that sells the loan to Freddie Mac. It has nothing to do with the person selling you the home.

Counting the units in a 2- to 4-unit or 5- to 10-unit condo project

The guide defines both in the Section 5701.1 glossary. In both, the count is units in the whole project rather than buildings, so a six-unit project built as two buildings of three is still a six-unit project.

A 2- to 4-unit project is "A project that is comprised of at least two but no more than four units that are each separately deeded with separate legal descriptions." The units can be attached, detached or a mix, and the project "may also be a mixture of residential units and no more than one commercial unit."

A 5- to 10-unit project uses the same wording with a range of five to ten units, and it "may also be a mixture of residential units and commercial units."

Small condo projects are not sorted into new and established

For larger projects, Freddie Mac sorts every project into one of two types, each with its own review. An Established Condominium Project is complete with no more phasing planned, at least 75% of the units have been sold to purchasers, and the owners control the association. A New Condominium Project is one that misses any of those.

For small projects, Section 5701.7 sets that sorting aside. Its table says, for both the 2- to 4-unit and the 5- to 10-unit groups: "Note: The Glossary definitions of Established Condominium Project and New Condominium Project are not applicable."

That matters most in small conversions. A four-unit building where the developer still owns two units and still runs the association would count as new in a bigger project. At this size, the label does not apply, and the purchase can still be Exempt From Review.

What counts as a detached condo unit?

The glossary defines a Detached Condominium Unit as "A Condominium Unit that is completely detached from any other unit in a Condominium Project." It also says a detached unit "can be in a Detached Condominium Project or in a Condominium Project that contains a mixture of attached, detached and/or semi-detached units."

So a stand-alone cottage condo can qualify even in a large community. Project size is not part of the test for a detached unit.

In mixed communities, Section 5701.7 says "attached and semi detached units within projects containing Detached Condominium Units may not be delivered as Exempt From Review" unless one of three exceptions applies. The first is a project of two to four units. The second is a project of five to ten units outside a master association. The third is one of the two refinances. In a 200-unit community with some detached cottages and some townhome-style units, the cottage can be exempt and the townhome next door generally cannot.

What Freddie Mac still checks on an exempt condo

Exempt From Review means the project skips the detailed review, and somebody still looks at it. Section 5701.7 sends every exempt loan back to the general requirements in Section 5701.2, which apply to every condo loan:

• "The project must have insurance that complies with the applicable requirements of Chapter 4703"
• "The Condominium Unit must be covered by a title insurance policy that complies with requirements of Chapter 4702"
• "If a Condominium Project is on a leasehold estate, the lease must comply with the requirements of Chapter 5704"

The same section says Freddie Mac "reserves the right to conduct its own review of the Condominium Project" on loans sold to it.

Section 5701.7 adds its own short list. The project must not be a condominium hotel or similar transient housing, a houseboat project, a timeshare, or a project with segmented ownership. It must not include manufactured homes, unless the loan is a Refi Possible mortgage. And it must not be "the subject of any action that would cause the Condominium Project to cease to exist or be the subject of an insolvency proceeding."

The insurance is the piece I would start on first. The master policy belongs to the association, so you can ask the association or the listing agent for a copy early, because it has to meet Freddie Mac's insurance chapter either way. For your own policy, when to start looking at homeowners insurance covers the timing.

Loan applications taken on or after August 3, 2026

If your loan application is taken on or after August 3, 2026, the version of the exemption in this article is the one your loan follows. On that same date, Freddie Mac also retired its shorter condo review. Section 5701.4 now reads in full: "Effective for Mortgages with Application Received Dates on or after August 3, 2026, Section 5701.4 is deleted." For a small condo, that makes the exemption more valuable, because a project that does not fit it needs one of the other review paths.

Can a condo refinance skip the project review?

Yes, in two situations, and both depend on who owns your current loan. A Freddie Mac-owned "no cash-out" refinance qualifies when the mortgage being refinanced "is currently owned by Freddie Mac in whole or in part or securitized by Freddie Mac." The table in Section 5701.7 caps it: "The maximum loan-to-value (LTV)/total LTV (TLTV)/Home Equity Line of Credit (HELOC) TLTV (HTLTV) ratio is 80%." Taking cash out puts you outside this path, and the difference between a refinance and a cash-out refinance explains why.

A Refi Possible mortgage qualifies when the existing loan is owned or securitized by Freddie Mac and the new loan meets the Refi Possible requirements in Chapter 4302.

One extra condition applies to both refinances. If the unit is attached and the project has 11 or more units, the project must not be in need of critical repairs or have an evacuation order. The guide uses "Critical Repairs" for repairs that "significantly impact the safety, soundness, structural integrity or habitability of the project's building(s)," such as unrepaired leaks or failed structural inspections.

Does the exemption apply to FHA, VA or Fannie Mae loans?

Everything in this article is Freddie Mac's rule set for conventional loans sold to Freddie Mac. Fannie Mae, FHA and VA each handle condo projects under their own guidelines. A conventional loan can go to either Freddie Mac or Fannie Mae, so if your purchase depends on this exemption, that is a question I would ask the lender early.

Checking whether the condo you want is exempt

You can sort most of this out before an offer.

1. The number of units. You can ask the listing agent or the association how many separately deeded units are in the whole condo project, counting every building.
2. Any master association. If the count is five to ten, you will want to find out whether the project belongs to a larger master association, because that answer decides whether the five- to ten-unit exemption is open to you.
3. The walls. If the unit shares no wall with any other unit, it may qualify as a detached condo unit regardless of the project's size.
4. Any commercial unit. In a two- to four-unit project, you will want to confirm there is no more than one commercial unit, since a second one takes the project outside the definition.

If you send me what you learn, I can tell you which category the condo appears to fit and what the lender will still ask for. When you are ready to move ahead, getting pre-approved for a condo is the next step. Your association dues count in your payment whether or not the project is reviewed, and how HOA dues work when you are buying covers that part.

Common mistakes with exempt condos

Missing the master association. A seven-unit project inside a larger master association does not fit the five- to ten-unit exemption, though a detached unit there still could.

Reading "exempt" as "unchecked." The project's insurance, the title policy and the ineligible project types are still checked, and Freddie Mac keeps its right to review the project.

An illustration, with made-up details

The details below are made up to show how the categories work.

Say you are choosing between two properties in the same community. One is a stand-alone cottage condo. The other is a unit in an eight-unit building that is part of a master association covering the whole community.

The cottage shares no wall with any other unit, so as long as the insurance and title policy meet Freddie Mac's chapters and the project is not one of the ineligible types, the cottage would not need a project review.

The eight-unit building has the right unit count, but the master association closes the five- to ten-unit exemption. That unit would need another review type, such as the Established Condominium Project review in Section 5701.5. It can still be a fine choice, with that review started early.

Seeing your own numbers

For a small or detached condo, Rate & Best Fit on the homepage shows conventional pricing for your own scenario without a credit pull or an account. You can choose a rate option that works best for you, and that selection can change as the file comes together.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, NMLS #483943. If you would rather talk it through first, you are welcome to call me, and we can go over the project, the unit count and what the lender will still want to see.

Nothing here is a loan approval, a denial, a commitment to lend, or legal advice. The rules quoted come from the Freddie Mac Single-Family Seller/Servicer Guide, using the August 3, 2026 versions of Sections 5701.2 and 5701.7, and the lender makes the final determination on any project. No letter from anyone is a loan commitment; final approval depends on the property, the appraisal and full underwriting.

Common questions

Does a condo in a 4-unit building need a project review?

Not under Freddie Mac's guide. Section 5701.7 makes a mortgage on a unit in a 2- to 4-unit condo project eligible as Exempt From Review, as long as the units are separately deeded and the project includes no more than one commercial unit.

Is a 5- to 10-unit condo exempt from project review?

It can be, under Freddie Mac's guide, if the project is not part of a master association. Section 5701.7 lists that kind of unit as eligible for Exempt From Review. If the project belongs to a master association, the exemption does not apply, though a detached unit in the project could still qualify on its own.

What is a detached condo unit for mortgage purposes?

Freddie Mac's glossary defines a detached condo unit as one that is completely detached from any other unit in the project, including in a mixed project with attached units. Under Section 5701.7, a mortgage on a detached unit can be Exempt From Review regardless of how many units the project has.

Does exempt from review mean the HOA insurance is not checked?

No. Section 5701.7 requires every exempt loan to meet the general requirements in Section 5701.2, including project insurance that meets Freddie Mac's Chapter 4703 and a title policy that meets Chapter 4702. The project also cannot be a condo hotel, a timeshare, a houseboat project or a project facing termination or insolvency.

Do FHA and VA loans follow Freddie Mac's condo exemption?

No. Exempt From Review is part of Freddie Mac's guide, and it governs conventional loans sold to Freddie Mac. FHA, VA and Fannie Mae each have their own condo project rules. If your purchase depends on a small or detached condo skipping review, it is worth asking early which program and which guide your loan will follow.