Outdated lending rules are sidelining Miami condo buyers, as federal standards treat building improvements as “deferred maintenance,” forcing many to put down 25% even in buildings that have passed all required inspections.
Miami’s condo market is experiencing a financing logjam unrelated to structural safety or reserve funding. Instead, the problem stems from how Fannie Mae’s underwriting standards classify building renovations, penalizing properties that have completed necessary upgrades.
Madeleine Romanello, a broker associate at the Romanello Villar Group, says Fannie Mae’s approach is preventing many mid-market condos from accessing conventional mortgages. Even after buildings complete required inspections and reserve studies, Fannie Mae often flags recent renovations as signs of deferred maintenance rather than proactive management. “Fannie Mae, the way they’ve looked at it is, oh, painting the building that’s deferred maintenance. We’re not going to lend here,” Romanello says. She calls this approach “very short-sighted.”
At the heart of the issue is Fannie Mae’s “non-warrantable” designation. Condos that don’t meet the agency’s underwriting criteria are labeled non-warrantable, making them ineligible for standard mortgages unless buyers put down at least 25%. “It’s still requiring 25% down if the condo is what they call non-warrantable, which means that Fannie Mae won’t underwrite it,” Romanello explains. Lenders, in turn, are wary of issuing loans they can’t resell to Fannie Mae or other investors, further restricting access to financing.
This creates a paradox: buildings that have completed renovations and met new safety requirements are treated as higher risk rather than lower. Instead of rewarding responsible management, federal standards are excluding these buildings from the conventional mortgage market, leaving well-maintained properties with fewer financing options.
These federal restrictions are reshaping how Miami brokers handle condo transactions. Romanello says the old process — finding a property and securing a loan — has been replaced by extensive pre-qualification. “We don’t want to go into a building where we know, let’s say you have a buyer, but they’re only going to put 10% down, then we need to make sure that the building qualifies, and all those inspections have been done,” she says. Brokers now spend significant time up front researching each building’s compliance status before showing units to buyers who can’t put down 25%.
Miami-Dade County’s condo registry has become an essential tool, allowing brokers to check inspection reports and reserve studies before scheduling showings. This extra step is now standard practice for agents working with buyers who need conventional financing.
These lending standards are clearly affecting Miami’s mid-market condo segment. Sellers who might attract a vast pool of buyers are often forced to accept all-cash offers at discounted prices. Meanwhile, younger buyers or first-time homeowners who could afford a 10% down payment are effectively shut out, even in buildings that have passed all inspections.
Romanello notes that buyers who hesitated three years ago, deterred by higher interest rates, missed out on significant appreciation. “Somebody should have bought three years ago, even when the rates were high; their house is probably worth $200,000 more,” she says. But for today’s condo buyers, the main barrier is not the interest rate—it’s the inability to secure financing at all. This has left a segment of Miami’s market stalled, not because of property conditions, but because of federal rules that don’t reflect on-the-ground realities.
Romanello argues that solving the problem requires federal action. “You really need a better solution from Fannie Mae,” she says, urging the agency to update how it evaluates building maintenance and renovations. Unless Fannie Mae adapts its underwriting standards to account for the post-Surfside environment—where buildings are now subject to strict inspections and reserve requirements—Miami’s mid-market condos will remain locked out of conventional financing.
For now, buyers and sellers in this segment must navigate a market where responsible building management is treated as a liability rather than an asset. Until federal standards catch up with local realities, Miami’s mid-market condo market is likely to remain constrained by financing barriers that have little to do with the buildings’ safety or quality.
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