What is a Non-Warrantable Condo?

Condos are the perfect homes for many reasons – they can open homeownership to different groups of people and can be an affordable way to live in an urban setting or vacation hot spot without buying an entire house. They are also a great way to own a home without worrying about maintaining and up-keeping the exterior of your home.

One of the issues a potential homebuyer may run into when searching for their dream condo is that it could be flagged as non-warrantable.

Why would a condo unit be considered non-warrantable?

When a condo is labeled as non-warrantable, it means that it does not meet conventional guidelines and will not be bought by government-backed entities like Fannie Mae and Freddie Mac. Many lenders consider financing a mortgage for this type of property to be too risky which can make it harder to finance.

Some companies may have their own guidelines as to what is considered warrantable or not, but the most common reasons for a condo to get flagged 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
• The community allows short-term rentals
• A single person or entity owns more than 10% of the total number of units
• The building owner or developer is involved in litigation of any kind

How can I find out if my condo is warrantable or non-warrantable?

Your realtor, lender, and condo’s management office should be able to have the resources available to help you determine if a condo you are interested in buying is non-warrantable.

You can also try checking out on your own through a database run by the Department of Housing and Urban Development for either FHA or VA approved condos. All you have to do is enter the condo by its name, location, or status.

What can I do if my condo is non-warrantable?

If you run into this issue and had your heart set on a specific condo, hearing that it’s been flagged as non-warrantable can be pretty upsetting. The good news is that you can still finance a non-warrantable condo if you can find a lender who offers non-warrantable loans.

If you need help finding out if your condo is warrantable or if you need options for a non-warrantable property contact one of our loan experts today.