Non-Warrantable Condo Financing

Non-Warrantable Condo Financing is a type of mortgage used to buy a condominium that does not meet the lending guidelines of conventional loan buyers like Fannie Mae or Freddie Mac.

Because these agencies won’t purchase loans for those condos, lenders treat them as higher risk, so buyers need special financing.

A warrantable condo meets strict lending standards set by Fannie Mae or Freddie Mac, such as:

• Financially stable HOA 
• Adequate insurance coverage 
• Limited investor ownership 
• No major litigation against the HOA.
   

If a condo doesn’t meet those standards, it becomes non-warrantable.

A condo project may be considered non-warrantable if:

• Too many units are rentals (often over 50%)
   
• The HOA is involved in lawsuits 
• The building is new construction and not fully sold 
• The developer still owns too many units 
• The property operates partly as a hotel or short-term rental 
• HOA has insufficient reserves.
   

These issues make conventional lenders reluctant to approve loans.

Since conventional loans won’t work, buyers usually use:

• Non-QM lenders 
• Portfolio loans from banks 
• Private lenders 

Typical terms:

• Down payment: 20%–30% 
• Credit score: usually 660+ 
• Higher interest rates than standard loans.
   

Condo price: $700,000

Because the building is 60% investor-owned, it is non-warrantable.

Loan terms might require:

• 25% down ($175,000) 
• Slightly higher interest rate 
• Specialized lender approval.
   

Many condos in urban areas and luxury buildings become non-warrantable, which means:

• Fewer financing options 
• Buyers may need larger down payments 
• Cash buyers become more common.