What Is a Non-Warrantable Condo?
A non-warrantable condo is a condominium unit that doesn’t meet the eligibility guidelines for conventional mortgage programs like Fannie Mae, Freddie Mac, FHA, VA, or USDA. While these properties may still be desirable to buyers and investors, they fall outside traditional lending criteria—requiring alternative financing options.
A Closer Look: Understanding Non-Warrantable Condos
When a condo project doesn’t meet certain requirements for financial health, occupancy, or legal status, it’s classified as non-warrantable. This doesn’t mean the property is unsafe or uninhabitable—it simply means it doesn’t qualify for backing by government-sponsored enterprises (GSEs) or traditional mortgage programs.
In these cases, buyers typically pursue portfolio loans or non-QM (non-qualified mortgage) loans—flexible loan programs offered by lenders willing to take on slightly higher risk for unique properties or borrower profiles.
Why Are Some Condos Non-Warrantable?
Several factors can cause a condo building to be considered non-warrantable:
1. High Investor Concentration
When more than half of a building’s units are rented out rather than owner-occupied, lenders may view the building as unstable. Rental-heavy buildings are perceived to carry more financial risk and less long-term upkeep.
2. Single-Entity Ownership
If one person, developer, or company owns more than 20% of the total units in the complex, the building often fails warrantability requirements. Too much ownership concentration can signal an unbalanced or unstable ownership structure.
3. Inadequate HOA Reserves
Lenders typically expect the homeowners association (HOA) to allocate at least 10% of its annual budget toward reserves. If a building lacks sufficient savings for maintenance or if a large number of owners are behind on HOA dues, that can be a red flag.
4. Pending Litigation
If the condo building or HOA is involved in active litigation—especially legal disputes that involve structural issues or safety—many lenders will not offer financing until the legal matter is resolved.
Can You Still Get a Mortgage on a Non-Warrantable Condo?
Yes. While traditional mortgages are usually not an option, there are loan programs specifically designed for non-warrantable condos. These loans often require:
- Higher down payments (typically 20% or more)
- Slightly higher interest rates
- Alternative documentation (bank statements, P&L, or asset depletion)
Despite the tighter requirements, these loan programs provide a pathway for buyers, investors, and self-employed borrowers to finance otherwise hard-to-finance condos.
Real-World Example
Imagine you're purchasing a two-bedroom condo in a well-maintained Florida complex. The unit checks every box—but your lender flags the building for a few issues:
- Over 50% of the units are rentals
- A single developer still owns 25% of the property
- HOA reserves are low, and several units are behind on dues
- There’s an ongoing lawsuit related to water damage repairs
As a result, a conventional or FHA loan is no longer an option. However, a portfolio or non-QM lender steps in, offering a financing solution that considers the overall investment potential and your unique financial profile—enabling you to move forward.
Frequently Asked Questions
What makes a condo non-warrantable?
A condo becomes non-warrantable when it fails to meet lender guidelines for occupancy ratios, financial reserves, ownership concentration, or legal status.
Can I get a mortgage for a non-warrantable condo?
Yes. Specialized lenders offer non-warrantable condo loans through portfolio or non-QM programs, often with flexible documentation and competitive rates.
Are non-warrantable condo loans more expensive?
They may carry slightly higher interest rates or larger down payment requirements, but many buyers find them comparable to conventional options with the right lender.
Can a condo become warrantable later?
Yes. If the issues causing non-warrantable status are resolved—such as improved reserves or settled litigation—the building may qualify for conventional financing again in the future.
Ready to Take the Next Step?
If you're considering a condo that doesn’t qualify for traditional financing, you're not out of options. With the right loan program and lender, you can still finance the purchase of a condotel, vacation rental, investment property, or other non-warrantable unit—often with flexible documentation and efficient approvals.