What is a Non Warrantable Condo?

 What is a Non Warrantable Condo?

This week, I want to talk about non warrantable condos. If you’re out there shopping for a home and you’re looking at condos you might’ve heard this term. So I want to first of all explain what a non warrantable condo is, and then dispel some of the myths around non warrantable condos, because you can get these financed, they’re not impossible to finance.

So first of all, what is a non warrantable condo? So to put it shortly, a non warrantable condo is a condo that doesn’t meet the Fannie Mae and Freddie Mac guidelines. So Fannie Mae and Freddie Mac have certain guidelines that condo complexes have to conform to in order to be insurable by Fannie Mae and Freddie Mac. So in order to get what we call a conventional loan on a condo they have to be able to meet these parameters through Fannie Mae and Freddie Mac. So there’s quite a few different things that they look at. There’s things like the percentage of investment properties that are owned within the complex. If there’s litigation, whether the HOA is being sued or vice versa, if the HOA is suing somebody. If there’s enough reserves in the HOA’s account. If they’re allocating enough in their budget towards reserves, so they have enough money in case something bad happens, like they have to replace the roof or some other big expense. So these are use a few examples of the things that Fannie Mae looks at to see if a condo is warrantable or not.

Now, if a condo doesn’t meet these parameters, it’s considered non warrantable. Another example of non warrantable is what we call a condo hotel. This is a property common in the mountain areas in the ski resorts. That’s a condominium, but you can go into it and rent the property, kind of like a hotel room. So it might have a website that looks like a hotel website where you can book rooms by the night and you’re not taking a specific unit you’re picking whether you have one king bed or two queen beds or whatever the case may be. A great example is that the Grand in Steamboat that’s like a condo hotel, so people own in there, but you can rent those rooms by the night, like a hotel room. They also have a front desks, this is another characteristic of a condo hotel, you walk into the building and it looks like a hotel. So this is another example of a non warrantable condo.

Now, if you’re looking for a FHA or VA loan, there are specific parameters for FHA and VA as well. And each of those entities has an approved condo list. So if the condo is on this list and it’s approved, then you can get financing on that condo. And if not, you can’t. Now, FHA has what’s called a single unit approval where you can get your specific condo approved, but it’s very, very difficult to get a condo approved through these parameters. Just FYI, if you go down that path and we can help you to look at it, to see if this is something that you can do, because we can get single unit FHA approvals.

The other thing too is with non warrantable condos, if you have more of a down payment, so 10% down on a primary residence, 25% down on an investment property, there are less stringent requirements for a conventional Fannie Mae, Freddie Mac condo. In other words, they don’t look at it with quite as much scrutiny. So it’s a little bit easier to get approved. This is what’s called a limited review. So that’s something to keep in mind. And a lot of times, things that are perceived as being non warrantable are actually things that can be overcome and we can actually get the condo approved and get you to closing.

Call us, we can help you through this process. Take a look at your condo. Fairway, my company we also have a condo database where we have records of projects that we reviewed so we can look, see if we can get clues as to whether the condo is going to be warrantable. If we’ve looked at it recently, we may not even need to do anything to get it through to closing. So just let us know if we can take a look at any of these condos for you.

https://www.youtube.com/watch?v=W4-EuaJXADY