Condotel/Condo

Warrantable vs. Non-Warrantable Condos

Are you contemplating buying a condominium? The first thing you will need to determine is whether you are buying a “warrantable” or “non- warrantable” condo. Then a condo is identified as a warrantable that means it meets Fannie Mae’s and Freddie Mac’s conventional guidelines and Fannie Mae and Freddie Mac will buy the loan. Typically, a condo is considered warrantable if, for instance:

  • No single entity owns more than 10 percent of the units in a project, including the developer

  • At least 51 percent of the units are owner-occupied

  • Fewer than 15 percent of the units are in arrears with their association dues

  • There is no litigation in which the homeowner’s association (HOA) is named

  • Commercial space account for 25 percent or less of the total building square footage

A non-warrantable condo is a condominium property in which the loan is not eligible to be sold to Freddie Mac or Fannie Mae, and as such, mortgage financing for this type of property is considered by most banks to be more “risky.” Freddie Mac and Fannie Mae would consider a condo to be “non-warrantable” if, for instance, the condo is in a development...

  • which has yet to be completed

  • which allows for short-term rentals

  • where one person or entity owns more than 10 percent of all units

  • where less than 50% of the occupants in a complex are the owners

  • involved in litigation of any kind regardless of whether the building is suing another party or is the party being sued.

Some common property types which fall into the non-warrantable category include condo- hotels, time shares, fractional ownership properties, and other projects which require owners to join an organization, such as a golf club. We have excellent loan programs and rates for loans of this type Please contact us for your current financing needs