Warrantable vs Non-Warrantable Condominiums


Typically, a condominium is considered “Warrantable” if no single entity owns more than 10% of the units in a project, at least 51% of the units are owner-occupied, fewer than 15% of the units are in arrears (behind) with their association dues, the homeowners association (HOA) is not named in any lawsuits, and commercial space accounts for 25% or less of the total building square footage.

A condominium or co-op unit is considered “Non-Warrantable” if the project has yet to be completed, its developer has not turned over control of the HOA to the owners, the community allows short-term rentals, a single person or entity owns more than 10% of all unit, or it’s in a project where the majority of units are rented to non-owners.


Warrantable Condos ...

A warrantable condominium is a condo property that qualifies for conventional home financing. This means you can purchase one using a conventional loan, an FHA loan, or a VA loan that is backed by the government entities Fannie Mae, Freddie Mac, the FHA, or the VA.

Warrantable condominiums are everywhere, in urban downtown areas, suburban neighborhoods, coastal communities, and rural communities. If you’ve found a warrantable condominium property you’re interested in purchasing reach out to a lender to get pre-qualified and discuss their loan programs.


Non-Warrantable Condos ...

Non-warrantable condominiums are condo units that don’t qualify for conventional purchase loans backed by Fannie Mae, Freddie Mac, the FHA, or the VA. This is because they don’t meet the entities’ minimum lending standards. Non-warrantable condominiums are often found in areas with a heavy short-term rental activity which are popular in Gulf Coast beach communities where vacation rentals are common such as along the Mississippi, Alabama, and Florida Gulf Coast.


Financing A Non-Warrantable Condo ...

Because of the perceived risky nature of non-warrantable condos, it’s a little more challenging to finance them. But it’s certainly not impossible. Generally, you’ll need what’s called a Portfolio Loan, which is a loan offered by your lender that ultimately stays in the lender’s portfolio versus being sold off to the secondary market, like conventional loans typically are.


Portfolio loans may:

Even with these stringent requirements, you can find the right financing plan for your needs especially if you’ve found a non-warrantable condominium you’ve determined is a good investment.



The PCBeach Realtor Note ...


The government lending approval market is constantly changing due to occupancy, HOA solvency, assessments, etc. As a general rule of thumb, "none are warrantable" ...  but, Marina Landing (a non-gulf-front condominium in Panama City Beach) does meet the requirements 

for a warrantable condominium complex.

 

Basically, any condominium that allows short-term rentals or that you can find on a VRBO search is out of the picture. For example, Marina Landing doesn’t allow rentals shorter than 6 months. So, that alone meets the Fannie Mae guidelines for warrantable. Currently, no gulf-front condominiums have those rental restrictions.