Thinking of buying a condo? One of the factors that could affect your home financing choice is whether or not the condo is warrantable. But how do you know if a condo is warrantable or non-warrantable?

Today we’ll delve into the differences between warrantable and non-warrantable condos and explain how to find the right home loan for each type.

Warrantable vs Non-warrantable Condos

Warrantable condos can be financed using a conventional mortgage, as long as the property meets certain guidelines set by government-sponsored enterprises Fannie Mae and Freddie Mac. In other words, warrantable condos do not necessarily require any special type of mortgage program; they can be bought and sold just like any other single-family home.

Buying or selling a non-warrantable condo isn’t as straightforward. A non-warrantable condo is a condo that does not meet the guidelines set by Fannie Mae and Freddie Mac, and is therefore deemed too risky for them to buy, in the event that the owner defaults on the home loan. For this reason, non-warrantable condos are harder to finance.

Financing a Non-warrantable Condo

To purchase a non-warrantable condo, the buyer will likely need to find an alternative to conventional financing. One option is a portfolio loan, which is a loan that lenders keep on their books instead of selling. Portfolio loans can help buyers secure financing for non-warrantable condos, but they may have to meet stricter underwriting rules and pay a higher interest rate.

What Makes a Condo Warrantable?

For a condo to be warrantable, the condo itself as well as the condo project community, must meet an extensive list of requirements set forth by Fannie Mae and Freddie Mac.

Warrantable condos must meet the following minimum requirements in regard to their ownership and governance (homeowners association).

At least 10% of the annual budget must go to reserves.
At least half of the units must be owner-occupied.

Note that these are only the minimum requirements as far as the governing and ownership statuses. There are several other requirements needed in order for a condo to be warrantable, which we will cover later. But first, let’s talk about how you can find out whether or not a condo is warrantable.

How Do I Find Out if a Condo is Warrantable?

To find out whether a specific condo property is warrantable, you can check with the Department of Housing and Urban Development (HUD). If the condo in question appears on one of HUD’s lists of properties eligible for FHA or VA financing, chances are it is warrantable. However, in order to confirm its warrantable status, you will need to ask your lender or real estate agent to order a condo project review.

Finding a Lender That Finances Non-Warrantable Condos
Even the most creditworthy borrowers may have a hard time finding a mortgage lender that offers loan products for non-warrantable condos. However, there are some lenders that offer specialty financing products that allow non-warrantable condos.

Luxury Mortgage is one such lender that offers loan products that include non-warrantable condos in their eligible properties. Some of our programs that allow non-warrantable condos on a case-by-case basis include…

Asset Qualifier Mortgage
Bank Statement Loan
Investor Cash Flow Mortgage

These programs are each part of Luxury Mortgage’s suite of Simple Access™ loan products. These loans are designed to help borrowers with non-traditional scenarios find a home loan that works for them.

To learn more, or to request a free rate quote, please don’t hesitate to contact Luxury Mortgage’s loan professionals today.

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