Non-Warrantable Condo Loans

When it comes to obtaining a mortgage for a condominium, lenders distinguish between two categories of condos: warrantable and non-warrantable. A warrantable condo meets specific criteria set by Fannie Mae and Freddie Mac, while non-warrantable condos do not. In this article, we will explore non-warrantable condo loans and how they differ from warrantable condo loans.

What is a Non-Warrantable Condo?

A non-warrantable condo is a condominium that does not meet the eligibility criteria established by Fannie Mae and Freddie Mac. This could be due to several reasons, including:

  • The condo is still under construction, and not all units have been sold
  • The condo association has too many delinquent homeowners’ association fees
  • The condo association is involved in pending litigation
  • The condo association has too many non-owner-occupied units
  • The condo association has restrictions on the percentage of units that can be rented out

What is a Non-Warrantable Condo Loan?

A non-warrantable condo loan is a financing option available for non-traditional condos that do not meet the eligibility criteria for a warrantable condo loan. These loans may have different requirements and qualifications compared to traditional condo loans.

Non-warrantable condo loans often require a higher down payment, have stricter credit score requirements, and may have higher interest rates compared to warrantable condo loans. Additionally, the loan may require additional documentation, such as the condo association’s financial statements, to ensure that the condo association is financially stable.

Why Do Non-Warrantable Condos Require Special Financing?

Non-warrantable condos require special financing because they pose a higher risk to lenders compared to warrantable condos. Lenders view non-warrantable condos as a riskier investment due to their non-traditional status and potential for legal issues or financial instability within the condo association.

For this reason, non-warrantable condo loans may require a higher down payment and stricter credit score requirements to mitigate the lender’s risk. Additionally, the loan may have a shorter repayment term and higher interest rates to compensate for the added risk.

If you are interested in exploring non-warrantable condo loans as a potential financing option, our mortgage brokers are here to help. We can walk you through the eligibility requirements, loan amount limits, and other criteria you need to know to determine whether a conforming loan is right for you. Click here to contact us or call (561) 717-6826 for a quote.