By Matt Allen
Vice President, Portfolio Lending (NMLS #415037)

What is a Non-Warrantable Condo Loan?

Nov 17, 2022

  • Non-QM Loans
  • Portfolio Loans
  • Non-conforming Loans

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.