Warrantable vs. Non-Warrantable Condos
If you are in the market to purchase a condo, one thing you will want to find out is whether the condo complex you are looking at is considered to be “warrantable” or “non-warrantable” at this time. A “warrantable” status means that the secondary mortgage markets, Freddie Mac and Fannie Mae, will be able to buy the mortgage from the bank you use to finance your purchase. A “non-warrantable” status means that the bank you use will not be able to sell the mortgage on the secondary market, as Freddie Mac and Fannie Mae consider loans on these types of properties to be too risky. Thus, banks will not be able to issue you a conventional loan for a non-warrantable property.
Factors That Cause a “Non-Warrantable” Status
Typically, the presence of one or more of these factors cause a condo to enter “non-warrantable” status:
- The development has yet to be completed.
- The development allows for short-term rentals.
- One person or entity owns more than 10% of the units in the development.
- Less than 50% of the occupants in the development are owners.
- The development is involved in litigation of any kind.
Alternative Financing for Non-Warrantable Condos
If you have your heart set on a condo that is considered “non-warrantable” at this time, don’t give up all hope! There may be another option for you. If you have good credit and have a consistent income to show, you may be able to get a credit union or smaller, private bank to write you a portfolio loan. A portfolio loan is a mortgage financed “in-house”- the bank will not sell this loan on the secondary market, but keep it as part of their “portfolio” at the bank. If you are looking for some lender references, please feel free to contact me, I’d be happy to assist in connecting you with potential options. If a non-warrantable condo ends up not being realistic for you, I can also help you find other, more doable, housing.
For Your Education and Entertainment
Here is a short song I wrote about non-warrantable condos, what causes the status, and a potential route for financing.