If you want to purchase a condo, you might find getting a mortgage a bit more challenging if the project is considered a non-warrantable condo. The approval process for the loan is the same but there is an additional process required to approve the condominium project itself.
What is a Non Warrantable Condo?
When a condominium project meets the eligibility requirements, it is deemed as a “warrantable condo” and the loan is eligible for purchase by Fannie Mae and Freddie Mac. When a project does not meet the eligibility requirements, it is deemed a “non-warrantable condo”, and the loan cannot be purchased by Fannie Mae or Freddie Mac.
There’s a lot to think about when buying a house – and it’s normal to have questions, especially if you are a first time home buyer.
Maybe you want to change your term or lower your payment or payoff your loan faster. A rate and term mortgage could be your key to both.
Finding a great home loan involves careful consideration of your needs, finances and history. We are here to guide you.
Frequently Asked Questions
The most common reasons for a condo to be considered a non-warrantable project include:
- The project is new construction and/or has yet to be completed
- The developer has not turned over control of the HOA to the owners
- A high percentage of units are occupied by non-owners (rentals)
- The community allows short-term rentals
- The association does not have adequate reserves
- HOA delinquencies exceed 15%
- A single person or entity owns more than 10% of the total number of units
- Commercial space in the project is greater than 35% of the total square footage
During the home search process, buyers should be working closely with their loan officer who will check each property to insure eligibility. If a desired property is deemed “non-warrantable, the loan officer will provide available loan options to assist with the decision-making process.
Even though non-warrantable condos are harder to finance, it’s not impossible. Growing demand for this type of financing has made it easier to obtain a mortgage and the loan terms have become more consistent with traditional financing. Buyers should expect a larger down payment requirement (typically 20%) and an interest rate that is higher than the conventional rate being offered.
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