Buying a Non-Warrantable Condo

Couple in condo

By Barb Bartus, Sr. Mortgage Loan Officer

Condominium complexes are classified as either warrantable or non-warrantable. A warrantable condo meets the conforming lending guidelines and is eligible to be sold to Fannie Mae or Freddie Mac. Non-warrantable condos do not meet the conforming lending guidelines, so Fannie Mae and Freddie Mac will not purchase them.

There are various reasons for a condominium to be considered non-warrantable including:

  • Percentage of units in the complex owned by one entity
  • Project not completed and further project phasing
  • Percentage of rental units in the complex
  • Percentage of units in arrears with their association dues
  • The HOA not turned over to the owners
  • The HOA not named in any lawsuits
  • Minimum amount of funds the HOA has in reserves

One of the first things your loan officer should check is if the condominium project is a warrantable project or non-warrantable project. To do this, the lender will send a questionnaire to the condo HOA to get answers about other units, any current litigation and more. If the project is non-warrantable, then financing can only be obtained using a portfolio loan. Conventional financing will not work here. A portfolio loan will be kept on the lender’s books and will not be sold on the secondary market. Terms of the mortgage will vary among lenders.

Michigan First Mortgage offers portfolio loans and is able finance non-warrantable condominiums. Work with our loan officers for the best solution and financing options for your next condominium purchase.