Why a Condo Loan Around Asheville Reviews the Whole Building

In western North Carolina, condos and townhomes are usually lumped together as "attached homes," but they sell at very different speeds. The Canopy Realtor Association's September 29, 2026 market release puts condo supply at 9.1 months in August 2026 across its 13-county western region. Townhomes and single-family homes were both at 6.1 months. Shoppers can see that gap. Most of the reason for it shows up only once a buyer applies for a loan. A condo lender reviews the borrower, and then it reviews the entire building the borrower is buying into.

That second review is why a condo can sit on the market while a townhome down the street goes under contract. It is also why a condo's price, on its own, tells you less than it seems to.

Buyers clearly want attached homes. In the same release, combined condo and townhome closings rose 15.1 percent over the rolling 12 months through August 2026. Single-family closings rose 11.3 percent over that period. Condos still carry three more months of supply than townhomes. When demand is that strong, a lasting backlog points to a bottleneck in the transaction itself.

The building gets its own loan file

Fannie Mae's condo project page explains the extra review. Condo unit owners have "collective ownership" and share financial obligations for the project's buildings, exterior property and amenities. Fannie Mae illustrates this with an example worth quoting:

"When the concrete slab in a project's underground parking garage is severely cracked, all unit owners must share the repair costs, either from HOA reserves or through a special assessment."

Lenders therefore check the project at the same time they underwrite the buyer. Fannie Mae's Condo Project Manager tool shows whether a project already has an eligibility status. If it doesn't, the lender has to assess the project itself. Fannie Mae lists these common reasons a project fails:

• Critical repairs, including significant deferred maintenance that could affect safety, structure or habitability
• Inadequate insurance
• Pending, significant litigation
• Operating like a hotel or motel, or managing daily or short-term rentals, even when the units are individually owned

Nationally, failures are uncommon. As of August 2025, only 3.6 percent of projects in Fannie Mae's system were marked ineligible. Insufficient master property insurance and critical repair issues were the top two reasons. When a project does fail, loans on its units can't be sold to Fannie Mae until the problems are fixed. One unresolved roof bid or underinsured master policy can stall every listing in the building at once.

FHA works the same way. HUD insures condo mortgages only in FHA-approved projects or in projects that qualify for Single-Unit Approval. Single-Unit Approval still involves project-level checks on insurance, owner occupancy and finances. When a building can't pass, the buyers left are mostly cash buyers and borrowers with non-agency loans. A smaller pool of buyers means more months of supply.

The reserve rule that changed in August

One part of this review got stricter while the August data was being collected. Freddie Mac lets lenders use an association's reserve study when the budget alone falls short of reserve requirements. Its condo unit mortgage FAQ describes three ways a reserve study can measure funding:

1. Baseline funding, where the reserve balance never drops below $0
2. Threshold funding, where the balance stays above a set dollar amount or percentage
3. Full funding, where the balance stays at or near 100 percent

For loan applications received on or after August 3, 2026, lenders can no longer use the baseline method to show adequate reserves. They also have to use the study's highest recommendation. If a study shows both threshold and full funding, the association's budget has to fund the full-funding amount.

Under baseline funding, an association can technically avoid running out of money while setting very little aside for future repairs. A building whose plan relied on that approach needs a bigger reserve line in its budget to support this kind of loan. Freddie Mac does allow lenders to request a project waiver for established projects that don't meet the reserve rules. Even so, a waiver request is one more step between a contract and a closing.

Asheville's rental rule and the building's rulebook

Asheville adds a local layer to the federal review. On the City of Asheville's homestay and short-term rental page, renting an entire house or apartment for less than a month counts as a short-term vacation rental, and those are allowed only in the Resort Zoning District. A homestay is different. The owner lives there full time, the home is in a residential zone, and only one or two bedrooms are rented. You can check a specific parcel's zoning with the city's address and zoning lookup.

The city rule and the federal rule push in the same direction. A whole-unit nightly rental plan for a downtown condo usually runs into zoning first. In buildings where nightly rentals happen anyway, lenders have to decide whether the project now has hotel-like characteristics. Freddie Mac says online ads for individual short-term rentals don't make a project ineligible on their own, and that lenders look at whether the association or management is involved in transient rentals.

A downtown condo building at 17 N. Market St. showed what happens when the building's rules and the city's rules conflict. In April 2024, the Asheville Citizen Times reported that full-time owners had sued owners of units used as short-term rentals. The suit argued the rentals broke both the condominium covenants and city rules. That June, the Citizen Times reported that a majority of owners had voted to amend the covenants to allow short-term rentals. City staff said the change had no effect on compliance with city ordinances.

Next came a proposal to convert some of the units to hotel use. According to the Citizen Times' August 2024 coverage, the city's legal department said hotel permits of that kind require consent from all of a building's owners. Every unit owner holds an interest in the common elements that hotel guests would walk through. Whatever the final outcome, the case shows how condo ownership works. A building's shared hallways tie every owner's plans to every other owner's.

A slow segment can still have record prices

Months of supply tracks how fast condos sell, while prices at the top of the market have kept rising. In August 2026, a condo at 75 Broadway St., Unit 301, set a new sales record for a downtown Asheville condo. 828 News NOW reported the price as $3.15 million. The Citizen Times rounded it to $3.1 million and noted that the same residence last sold in 2021 for $2.85 million.

At that price, financing hurdles carry less weight, and the building's appeal matters most. Lower down the price range, where most buyers depend on agency or FHA loans, the project review shapes who can actually buy. For context, Buncombe County's August 2026 median sale price across all property types was $501,000, with 6.0 months of supply and 63 average days on market. Condos are part of that market, and the extra review is part of what slows them down.

For both buyers and sellers, the condo's file matters as much as the unit. Start with these documents:

• The association's current budget and how much it sets aside for reserves
• The most recent reserve study, if there is one, and which funding method it uses
• The master insurance policy and the coverage it carries
• Any pending litigation, planned repairs or special assessments
• The covenants' rules on rentals, and the parcel's zoning under Asheville's short-term rental rules

A seller who gathers these before listing can find a problem before a buyer's lender does. A buyer who asks for them early can find out in the first week whether a loan program will work for the building, rather than in the last week before closing.

FAQ

Do townhomes go through the same project review? Fannie Mae's project rules covered here are written for condo and co-op projects. Your lender can tell you which rules apply to a specific townhome community. In the August 2026 regional data, townhome supply was 6.1 months, the same as single-family homes.

Can a condo be rented short term if the covenants allow it? Covenants and city zoning are separate rules. In Asheville, renting a whole unit for less than 30 days is allowed only in the Resort Zoning District. At 17 N. Market St., the city said a covenant amendment did not change ordinance compliance.

Is condo supply getting better? A little. Regional condo supply dropped from 9.3 months in August 2025 to 9.1 months in August 2026.

This post is general information about lender and city rules. It is not legal, financial or insurance advice, so please check your own situation with a lender, attorney or insurance professional before you act.

If you own an Asheville condo and want to know how its association's paperwork could affect your sale price and timing, Elevate Asheville Realty Group can go through the building's documents with you and prepare a free home valuation that accounts for them.