Sometimes, condominiums don’t meet the conventional loan requirements needed to be approved by government-backed entities like Fannie Mae and Freddie Mac. These are called non-warrantable condos. To get financing for a loan to purchase a condo with this rating, borrowers will need to seek a lender that offers non-warrantable condo loans.
When is a Condo Considered Non-Warrantable?
Several factors can contribute to a condo being tagged as non-warrantable, including:
- Ownership requires a membership, like a golf club.
- The project is new construction and not completed yet.
- One person or entity owns more than 10% of the total units.
- The condo allows most units to be rentals and/or short-term rental units.
- The condo developer hasn’t ceded control of the owner’s association.
- More than 25% of the units in development will be used commercially.
- There is litigation of any kind tied to the project.
What are Non-Warrantable Condo Loan Requirements?
Because lenders must keep non-warrantable condo loans as portfolio loans, they will ask for specific requirements to ensure the borrower can repay the loan. These requirements may include the following:
- A minimum credit score of 680
- Last two years of verifiable income, including W-2s and tax returns
- A debt-to-income ratio (DTI) of no more than 45%
- A loan term of 30 years or less
- Points and fees cannot exceed 3% of the loan amount
If you’re thinking of purchasing a non-warrantable condo, call the experts at NASB to help you get the financing at 855-921-4921, or click here for more information.
