Written and reviewed by Jack Gladden, Senior Loan Officer, NMLS #1470164
Updated · 4-minute read · How these guides are written
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Non-warrantable condos in brief
- What it means
- The building doesn’t meet Fannie Mae or Freddie Mac project rules, so most conventional lenders can’t finance any unit in it, however strong the buyer.
- Common causes
- Litigation, critical repairs, low reserves, unpaid HOA dues, one owner holding many units, too much commercial space, or hotel-style rentals.
- Who still lends
- Portfolio and non-QM lenders that keep the loan on their own books and review the building themselves.
- Typical terms
- Often 20–25% down depending on the issue, the lender and how you’ll use the unit, and more in Florida; usually a higher rate than conventional.
- Florida
- Milestone inspections and reserve studies after Surfside have made many older buildings temporarily hard to finance.
- Where
- California, Arizona, Florida and Ohio; most often Los Angeles, Orange County, San Diego and South Florida.
Why a condo building isn’t warrantable.
Warrantability is about the building, not about you. Before a conventional lender can sell a condo loan to Fannie Mae, the project has to pass Fannie’s rules. These are the most common reasons it doesn’t, with Fannie Mae’s current thresholds:
| Issue | Fannie Mae’s rule |
|---|---|
| Litigation | Ineligible if the HOA, or the developer, is in litigation over the building’s safety, structure or habitability. |
| Critical repairs | Ineligible if repairs significantly affect safety, structure or habitability, or the project’s finances. |
| Unpaid HOA dues | No more than 15% of units can be 60 or more days behind on dues. |
| Reserves | The budget must put at least 10% toward replacement reserves (in a full review). |
| One owner, many units | In buildings of 21 or more units, no single owner can hold more than 20% of them. |
| Commercial space | No more than 35% of the space can be commercial or non-residential. |
| Hotel-style operation | Front desks, daily rentals or rental pools make it a condotel; see condotel loans. |
| New buildings | Projects still selling units have separate presale and completion rules. |
Lender websites often quote older or stricter figures; the table follows Fannie Mae’s Selling Guide. Lenders can also add their own stricter rules, called overlays.
Florida’s milestone inspections.
After the 2021 Surfside collapse, Florida now requires condo buildings of three or more habitable stories to have a milestone structural inspection by the end of the year they turn 30. Local officials can move that to 25 near salt water. After that, inspections repeat every 10 years. The same buildings need a structural integrity reserve study at least every 10 years, and associations must keep reserves for the structural items it identifies.
When an inspection finds repairs, or reserves are short, the building can fail Fannie Mae’s critical-repair or budget rules until the work is funded and done. Owners still need to buy, sell and refinance in the meantime, and portfolio lenders can often finance units while the repairs are under way.
Who still lends, and how to qualify.
Portfolio loan
A bank or lender keeps the loan and sets its own building rules.
Best forOwner-occupants and second homes
Non-QM condo loan
Specialist lenders that review the building’s issue case by case.
Best forLitigation, reserves or ownership issues
DSCR loan
For a rental unit, qualify on the rent; many DSCR lenders accept non-warrantable buildings.
Best forInvestors
FHA single-unit approval
FHA can sometimes approve one unit in a building that isn’t FHA-approved, if it meets FHA’s own rules.
Best forSmaller down payment buyers, when eligible
| Requirement | What’s typical |
|---|---|
| Down payment | Often 20–25%, more in Florida, for investors and for buildings with bigger issues. |
| Building documents | A condo questionnaire, the budget, the reserve study or milestone report, insurance, and details of any litigation. |
| Credit and reserves | Usually stronger than for a warrantable condo; reserves of several months are common. |
Know the building?
Send me the building’s name and address. I’ll find out why it’s non-warrantable and which of my lenders will finance it, before you commit.
Where I see this most.
- Southern California
- Retrofit requirements, investor concentration and short-term rental use are the common issues in Los Angeles, Orange County and San Diego buildings.
- South Florida
- Milestone inspections and reserve funding have left many older buildings in Miami-Dade, Broward, Palm Beach and the Keys temporarily hard to finance.
Should you buy a non-warrantable condo?
Sometimes the issue is temporary and the price reflects it; sometimes it’s a warning. Weigh these before you commit:
- What caused it. A finished repair or a settled lawsuit can return a building to warrantable; an underfunded building with big repairs ahead may face special assessments.
- Resale. Your future buyer faces the same financing limits, which can narrow the market until the issue clears.
- Cost. A larger down payment and usually a higher rate than a conventional condo loan.
- Refinancing later. Once the building becomes warrantable, refinancing into a conventional loan can lower your rate.
How we get started.
Send me the building
Name and address, the price, and how you’ll use the unit.
I find the issue
Through the condo questionnaire and documents: what makes it non-warrantable, and whether it’s temporary.
Match the lender
Portfolio, non-QM, DSCR or FHA single-unit, depending on the building and you.
Close
Then, if the building clears its issue, we can look at refinancing.
Non-warrantable condos, answered plainly.
Which lenders finance non-warrantable condos?
Portfolio and non-QM lenders that keep loans on their own books, plus DSCR lenders for rentals. Each sets its own building rules, so I match the building’s issue to the lender that accepts it.
Can you get a mortgage on a non-warrantable condo?
Yes, usually with a larger down payment and a higher rate than a conventional condo loan. See who still lends.
Why would a condo not be warrantable?
Most often litigation, critical repairs, unpaid HOA dues, low reserves, one owner holding many units, commercial space, or hotel-style rentals. See the reasons.
Is it hard to sell a non-warrantable condo?
It can be, because your buyers face the same financing limits. When the issue is temporary, it often clears before or soon after you sell. See also: Warrantable vs non-warrantable condos.
Does Fannie Mae lend on non-warrantable condos?
No. By definition the project doesn’t meet Fannie Mae or Freddie Mac rules, which is why portfolio and non-QM lenders are needed.
How can I tell if a condo is warrantable?
A lender checks the building through a condo questionnaire and its documents, and Fannie Mae keeps a database of reviewed projects. Send me the building and I’ll check.
Can I borrow to pay a special assessment for milestone repairs?
Often, yes: through a cash-out refinance, a HELOC or second mortgage, or an unsecured loan, depending on your equity and the building.
DSCR & investor
Foreign national & ITIN
Condotel & short-term rental
Second mortgage & HELOC