Mortgage lenders use a different set of rules when you buy a condo.  It is not just your creditworthiness the lender has to consider when you apply for a mortgage to purchase a condo, they must also confirm that the condominium development has a strong financial and management structure.

Not all condominium developments meet the strict Fannie Mae and Freddie Mac guidelines that allow them to be classified as "warrantable." Some condominium developments do not meet the minimum standards and are designated non-warrantable.

Non-warrantable condos are more challenging to finance.  When buying a condo, it is important to ask the real estate agent, developer, or mortgage lender about the building's warrantability before submitting an offer.

A condo is considered warrantable if:

  • No single entity owns more than 10% of the units in the project, including the developer
  • At least 51% of the units are owner-occupied
  • Fewer than 15% of the units are in arrears with their association dues
  • The homeowners association (HOA) is not named in any lawsuits
  • Commercial space accounts for 25 percent or less of the total building square footage

A condo 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 units
  • It's in a project where the majority of units are rented to non-owners

It is important to find out if the development is involved in litigation.  Regardless of the status as plaintiff or the defendant in a legal suit, the condo is usually considered "non-warrantable."