A warrantable condo meets Fannie Mae and Freddie Mac guidelines making it eligible for conventional financing. Non-warrantable condos require portfolio or non-QM loans.
Key factors: owner-occupancy ratio (typically 50%+), no pending litigation, HOA financial health, and commercial space limits.
Before buying a condo check if it is warrantable as this affects your financing options.
What Makes It Warrantable
Owner-occupancy ratio of at least 50% (some lenders require 60-70%), no more than 15-20% of units delinquent on HOA fees, no excessive commercial space (typically under 20-25%), and no pending litigation against the HOA unless covered by insurance.
Fannie Mae/Freddie Requirements
Fannie Mae/Freddie Mac require: the HOA is incorporated and operating, project is fully completed, no single entity owns more than 10% of units (for new projects), and the condo meets standard property eligibility.
How to Check
Check warrantability by asking the HOA for a condo questionnaire that documents occupancy ratios delinquency rates and legal status. Your lender can review this to determine warrantability.
Non-Warrantable Alternatives
Non-warrantable condos can still get financing through portfolio lenders who keep loans on their books. Rates are higher and down payments larger (20-30%). Non-QM lenders also offer condo financing.
Impact on Financing
Warrantable condos qualify for conventional FHA VA and USDA loans. Non-warrantable limits your options to portfolio or non-QM loans with higher rates and stricter terms.
Red Flags
Red flags: high owner-occupancy ratio, pending lawsuits, low HOA reserves, high delinquency rates, recent special assessments, and commercial space over 25%.