Condominium Financing is not always easy or a quick process.  Understanding if a condominium is warrantable or non-warrantable is critical to your condo purchase.  Homebuyers must also know which lenders can offer financing for condominiums and understand what the terms of a mortgage would be, before making an offer. 

After the market crash of 2007-2010, many loan investors revised the mortgage qualifications on condo loans to avoid defaults and bankruptcies of Condo Associations that resulted in their inability to cover their expenses, renew insurance policies, make repairs, and support common elements of the Association. (When there we a ton of foreclosures - there were a ton of unpaid and delinquent condo fees that were uncollected leaving Associations bankrupt.)

"So, why can't I get a 30 year fixed rate mortgage on a condominium?"  That is a question so many buyers ask as they search for condos and when they are told that certain condos are not "warrantable" for financing.  What exactly does the term "warrantable" mean?

Fannie Mae and Freddie Mac standards are often used to determine warrantability of a condo property. "Conforming" means that a loan meets that standards of these two entities. They use the term warrantable for the properties they will allow to be financed.  Non warrantable condos are much harder to be financed and usually require higher down-payments, higher interest rates and sometimes adjustable rate mortgages or more.

Certain qualifiers exist for determination of Fannie Mae and Freddie Mac "warrantability" of a condo such as:

1. No single entity is on record as owning more than 10% of the property.

2. 51% or more are owned by owner-occupants.

3. There are 15% or fewer owners who are delinquent on their condo fees.

4. Commercial space is less than 25%

5. There are no lawsuits naming the Condo Association as a party.

There are forms that lenders require that ask a lot of questions including these main qualifiers above. Conforming Condos that don't meet these criteria of Fannie Mae and Freddie Mac are considered "non-warrantable." 

Before you attempt making an offer on a condo ask your Realtor to determine a condo property's eligibility for the type loan you are attempting to use. Also, allow your lender to check on a condo's status and warrantable or non-warrantable status.  If you are wanting to use a FHA loan for your condo... that is a whole other situation - let's talk - or stay tuned for the next blog post.

To browse condos in the Tallahassee area, take a look at the MLS using our website search. If you want to know if one of the condos you find are warrantable or if you can get a conventional fixed-rate mortgage, please let us know.