Background

Fannie Mae and Freddie Mac set the guidelines for conventional loans and FHA for FHA loans and VA for VA loans.  For a condo to qualify for a loan, it must meet Fannie Mae, Freddie Mac, FHA, or VA requirements.

What is a Warrantable Condo

The term “Warrantable” means a condominium complex has features that lenders view as favorable in minimizing their risk exposure. These features protect a complex from future hazards and situations that could threaten the value of the individual units.  Warrantable refers to the condominium complex as a whole, not the individual units.

Features of a Warrantable Condo

For a condominium complex to be considered “Warrantable,” it generally must meet the following requirements:

• Most of the units are owner occupied or second homes; not investment properties
• 15% or less of the units can be 30 days delinquent on HOA dues
• No more than 10% of a project can be owned by a single entity
• No more than 20% of the project can consist of non-residential space
• On established and existing projects, at least 90% of the units must be sold
• For new and currently converted construction, 70% of the units must be pre-sold
• The HOA must have at least 10% of its budgeted income designated for reserves
• Adequate insurance coverage for liability, fidelity, and a master policy for building
• HOA budget review

Steps to determine if a Condo is Warrantable

There is no clearinghouse that lists warrantable or non-warrantable condo complexes or projects.  However, there are several steps that can be taken to determine the eligibility and include:

1. Ask the property management company or the real-estate selling agent if the complex is considered “Warrantable.”
2. See if the condominium complex has met Warrantable Standards:
   
   
   • Fannie Mae - https://www.fanniemae.com/singlefamily/project-eligibility
   • FHA - https://entp.hud.gov/idapp/html/condlook.cfm
   • VA - https://vip.vba.va.gov/portal/VBAH/VBAHome/condopudsearch
3. Have your lender provide you with a Condo Cert also known as the Condo Questionnaire to be completed by the HOA or Property Management Company.  Note that many HOA’s and Companies charge a fee to complete a Condo Cert.

Options for Non Warrantable Condos

Just because a condominium complex is Non-Warrantable does not mean you will not be able to find financing. To see our financing for Non-Warrantable condos, Click Here!