Non-Warrantable Condo Guidelines | Non-Warrantable Mortgage Financing
Not all lenders are willing to finance a non-warrantable condo. Financing for non-warrantable condos are made available through non-qm lending. It is important to understand non-warrantable condo guidelines before starting the condo purchase process.
Non-Warrantable Condo Definition
Fannie Mae and Freddie Mac have guidelines when it comes to condo projects. A condo project that has certain characteristics is ineligible for financing for the two Government Sponsored Enterprises (GSE) – they will not purchase or securitize mortgages with these characteristics.
Though Fannie Mae and Freddie Mac will not allow financing for a non-warrantable condo, there are other financing options available.
How Do Lenders Know if the Project is Ineligible?
When buying a condo, it is important to order a Condominium Project Questionnaire in the early stages of the loan process. This will help prevent spending too much time or money in the loan transaction.
Some mortgage Loan Originators can forget this step and go straight to ordering an appraisal. It is not uncommon for lenders to deny a loan and tell you that they do not have financing for a non-warrantable condo.
What Makes a Condo Non-Warrantable?
Some common ineligible characteristics, but not limited to include:
- Arrangements for split ownership.
- Certain business arrangements.
- Continuing care facilities.
- Excess concessions to third parties.
- Litigations and priority liens.
- Memberships that are mandatory.
- Non-real estate transactions.
- Non-residential commercial space.
- Projects that are partially managed or operated as a hotel or motel.
- Single-entity ownership – this is the most common.
Financing for Non-Warrantable Condos
Getting pre-approved for a non-warrantable condo mortgage is not much different than a traditional loan. There are plenty of options that are made available when talking to the right mortgage company.
Six examples of loan programs that allow non-warrantable condo financing for purchases and refinances:
- Bank statements loans or income from 1099s.
- Full document – traditional income mortgages.
- Residual income mortgages.
- Investment debt-service coverage loans.
- Investor no ratio loans.
- Foreign national loan programs.
Guidelines Vary Depending on Loan Type
- VA and FHA requires the condo to be VA or FHA approved.
- For conventional loans, they must follow Fannie Mae or Freddie Mac guidelines.
- If a mortgage company offers non-warrantable condo financing, guidelines can vary.
- And there is even financing available through wholesale portfolio lending for condotels.