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.
We have the experience, the social track record, and access to the right resources to get loans done.
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