Non Warrantable Condos

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Financing condos can be tricky in the current lending environment. You may hear the term “non warrantable.” What is a non warrantable condo? Basically, it is a condo that cannot be sold to Fannie Mae or Freddie Mac. If this is the case, it is also not likely to be approved by FHA.

So… if you are looking to buy a condo and don’t want to get too far in the process only to learn that the condo complex cannot get approved for a loan, how should you start this process?

After you’ve been preapproved by your loan officer, be sure to let them know if you are looking to buy a condo or a town home. From my previous posts, sometimes a home may look like a town home, but legally be a condo. Looks can be deceiving. Your loan officer should be able to help determine if a property is legally a condo if you can provide the address and name of the complex.

If it is determined to be a condo, a condo questionnaire will need to be completed. These questionnaires usually have two dozen (or more) questions on them. The make or break questions usually come down to:

  1. How many units are set aside for commercial space? Fannie Mae and Freddie Mac only allow for up to 20% of the units to be used for commercial space. If more than 20%,  the condo community probably will not be approved.
  2. Does any one person or corporation own more than 10% of the total units? If more than 10%, the condo community probably will not be approved.
  3. Are more than 15% of the homeowners delinquent on their monthly HOA fees? If more than 15%,  the condo community probably will not be approved.
  4. Is at least 10% of the budget being contributed to reserves? If less than 10%,  the condo community probably will not be approved.

If you find out this is the case on the condo community, then you will need to find a lender that will finance non warrantable condos. Sadly, at this time, I cannot finance non warrantable condos. I will certainly let my readers know if that changes.

Are you in a position where you don’t know if a condo is or is NOT warrantable? If the condo is in the state of Georgia, contact me. We can look and see if it is warrantable and map out the best way to proceed toward buying the unit.

 

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