Warrantable or Non-Warrantable? Your Condo Loan Options

Mortgage giants like Fannie Mae and Freddie Mac back most conventional home loans, and they have specific guidelines for the types of properties they’re willing to support. If a condo meets those guidelines, it’s considered warrantable — meaning it’s eligible for more traditional, widely available financing. If it doesn’t meet the criteria, it falls into the non-warrantable category, making things more complicated.

A condo is generally considered warrantable if it checks the following boxes:

• Most units are owner-occupied (not primarily rentals)

• The homeowners association (HOA) is financially stable and has adequate reserves for future repairs
• There are no ongoing lawsuits that could affect the property or its finances
• No single owner holds more than 10% of the units
• Proper insurance coverage is in place

In other words, warrantable condos are seen as low-risk in the eyes of lenders, which means you’re more likely to get approved for a conventional loan with better rates and terms.

If a condo doesn’t meet the criteria to be considered warrantable, it falls into the non-warrantable category. That might sound like a red flag, but it doesn’t mean you’re back to the beginning of your home search — It just means you’ll need to take a different path when it comes to financing.

A non-warrantable condo simply doesn’t meet the lending guidelines set by Fannie Mae or Freddie Mac. Because of this, many traditional lenders won’t offer conventional loans on these properties. Instead, you’ll need to explore non-conventional options.

Working with a knowledgeable lender is the key to navigating each option with confidence and clarity.

When you buy a single-family home, you’re buying the whole property — land, structure, everything. But when you buy a condo, you’re purchasing a unit within a larger shared development. That means lenders need to consider not just your financial situation but the overall health of the building and its HOA.

Factors like the building’s finances, legal issues and occupancy rates can directly impact whether the condo is seen as high or low risk for lending purposes. This added layer of scrutiny determines whether a condo is warrantable or non-warrantable.

Several factors can push a condo into non-warrantable territory. These situations make lenders a bit uneasy because they can indicate higher financial risk, potential resale issues or instability in the condo community. Here are some of the most common reasons a condo might be labeled non-warrantable:

• There are active lawsuits involving the HOA. If the homeowners association is involved in litigation — especially lawsuits related to construction defects, insurance disputes or safety concerns — lenders may back away. Even if the unit is in great shape, legal battles can impact the entire development’s value and financial health.
• More than 15% of condo owners are behind on their association dues. When a significant number of residents aren’t paying their dues, it signals financial instability. It also means the HOA may not have enough cash flow to handle essential maintenance, repairs or reserves — which can affect the long-term property value.
• Commercial space exceeds 25% of the building’s total square footage. Lenders typically prefer developments that are primarily residential. If a large portion of a building is dedicated to businesses like restaurants, offices or retail shops, that introduces more market volatility — and potentially more wear and tear or foot traffic than a traditional residential setup.
• Less than 51% of the units are owner-occupied. When most units are rented out rather than lived in by owners, it can affect the overall upkeep and stability of the community. Lenders tend to see owner-occupants as more invested in the property, which usually results in better maintenance and lower risk.

Remember that while these factors can certainly limit your loan options, it doesn’t mean financing is impossible. Specialized lenders who work with non-warrantable properties can often help you find an alternative solution.

In short, warrantability has a big impact on your financing options.

Fewer lending options means more hurdles to overcome. Many mortgage lenders, especially those who work primarily with conventional loans, won’t finance a non-warrantable condo. That’s because they won’t be able to sell the loan to Fannie Mae or Freddie Mac after closing. And without that safety net, lenders take on more risk — and most aren’t willing to do that.

Another reason warrantability matters is for resale value. If it’s harder for you to get financing on a non-warrantable condo, the same could be true for future buyers. This may shrink your pool of interested buyers when it’s time to sell, slowing down the process and negatively affecting your property’s value.

If the condo you’ve been dreaming of is considered non-warrantable, there are still options to help you secure a home mortgage loan.

• Preferred Lenders: Many new condo developments partner with preferred lenders who are already familiar with the property. These lenders may offer financing even before the condo officially meets warrantable standards.
• Government-Backed Loans: Depending on your eligibility, you might qualify for alternative financing through government-backed options like a Federal Housing Administration (FHA) or Veterans Affairs (VA) loan. These programs are often more flexible and can sometimes be used even if the condo isn’t warrantable — though the development will need to meet criteria set by the FHA or VA.
• Refinancing Later On: A condo’s non-warrantable status isn’t necessarily permanent. Once the building meets the right qualifications, you may be able to refinance your loan. This can bring big benefits, such as securing a better interest rate, shortening your loan term and even lowering your monthly mortgage payments.

No matter the condo’s current status, having the right financing strategy, and the right team of experts by your side, can make all the difference in turning your homeownership plans into reality.

There are a few approaches to determining if the condo you’re interested in is warrantable. Thankfully, you don’t have to figure it out alone.

Here’s who (and what) can help:

• Your Realtor or Mortgage Broker: These professionals are often your best first stop. They’ll know the right questions to ask the condo association and can help request the necessary documents, such as a completed condo questionnaire that lenders use to determine warrantability.
• The Condo’s Management or HOA Office: The building’s management team or HOA can tell you whether the development currently meets conventional lending guidelines. They’ll also know if there are any pending lawsuits, what the owner-occupancy rates are and other potential situations that might impact financing.
• FHA and VA Approved Condo Lists: The U.S. Department of Housing and Urban Development (HUD) maintains a searchable database of warrantable condos. If you’re eligible for a VA loan, you can also search the VA’s approved condo list here.

Keep in mind that condo warrantability can change over time, especially in new developments, so it’s worth checking more than once throughout your buying process. Knowing the condo’s status early on can save time, reduce stress and help you make the most informed decisions about your financing.

At Blue Water Mortgage, we have several alternative financing options for non-warrantable condo loans. If you need help securing a loan for your warrantable condo or need options for a non-warrantable property, contact one of our loan experts today. We’re happy to answer any questions you may have, anytime.

Q: What is a non-warrantable condo?

A: A non-warrantable condo doesn’t meet the lending guidelines set by Fannie Mae or Freddie Mac. Because of this, many traditional lenders won’t offer conventional loans on these properties. Instead, you’ll need to explore non-conventional options. Characteristics include:

• Ongoing lawsuits
• 15% of condo association members are behind on associate dues
• Commercial space taking up 25% of the total square footage
• Less than 51% of condos are owner occupied.

Q: Should I buy a non-warrantable condo?

A: That depends on your goals, budget, and how comfortable you are with a little extra complexity in the financing process. Non-warrantable condos can still be a great investment, especially if you love the location or it’s part of a new development expected to gain warrantable status soon. Just be sure to work with an experienced lender who can walk you through your options and help you plan for things like refinancing and resale.

Q: Are non-warrantable condos hard to sell?

A: They can be a tougher sell, mainly because fewer buyers are able, or willing, to navigate the limited financing options. But that doesn’t mean they’re impossible to sell. If the condo is in a great location, priced right and the HOA is actively working toward becoming warrantable, it can still attract the right buyer. Just know that it may take a little more time and strategy when you’re ready to list.

Q: How to find out if a condo is warrantable or non-warrantable?

A: There are a few approaches you can take to find out if the condo you’re interested in is warrantable. Your realtor or mortgage broker, the condo’s management or HOA and public databases kept by FHA and VA lenders are all great sources for this information.