WARRANTABLE VS NON-WARRANTABLE CONDOS

Warrantable vs Non-Warrantable Condos Are you contemplating buying a condominium in Florida? The first thing you will need to determine is whether you are buying a “warrantable” or “non- warrantable” condo. When a condo is identified as a warrantable that means it meets Fannie Mae’s and Freddie Mac’s conventional guidelines and Fannie Mae and Freddie Mac will buy the loan. Typically, a condo is considered warrantable if, for instance: • No single entity owns more than 10% of the units in a 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 • There is no litigation in which the homeowner’s association (HOA) is named • Commercial space account for 25 percent or less of the total building square footage A non-warrantable condo is a condominium property in which the loan is not eligible to be sold to Freddie Mac or Fannie Mae, and as such, mortgage financing for this type of property is considered by most banks to be more “risky.” Freddie Mac and Fannie Mae would consider a condo to be “non-warrantable” if, for instance, the condo is in a development: • which has yet to be completed • which allows for short-term rentals • where one person or entity owns more than 10% of all units • where less than 50% of the occupants in a complex are the owners • involved in litigation of any kind regardless of whether the building is suing another party, or is the party being sued. Some of the common property types which fall into the non-warrantable category include condo-hotels, time shares, fractional ownership properties, and other projects which require owners to join an organization, such as a golf club. Non-Conforming financing is available for non-warrantable condos and townhomes While mortgages backed by the FHA, VA, Freddie Mac and Fannie Mae dominate the market, they aren’t the only options available. We offer non-conforming mortgages for non-warrantable condos and town homes in partnership our wholesale lending partners. These are institutions and private investors that provide alternative financing for high risk loans and can require a substantial down payment of 25% or more. FHA and VA mortgage rules for condos VA and FHA home loans are government-backed mortgages. FHA loans are insured by the Federal Housing Administration. VA loans are loans guaranteed by the Department of Veterans Affairs. Both loan types are known for their more flexible lending guidelines than conforming mortgage financing. The FHA and VA maintain lists of approved communities, but don’t despair of the unit you want isn’t in a development on those lists. Both agencies have made it easier for condo and co-op associations to get their buildings approved. In fact, the FHA recently changed its condo approval rules to help more borrowers get qualified. Some of the new basic requirements for an FHA condo loan now include: • The borrower must meet “standard” FHA mortgage guidelines • At least half of a project’s unit must be owner-occupied • In a newly-built project, at least 70% of the units must be sold In general, if Fannie Mae or Freddie Mac have already approved a building, the FHA and VA will also authorize lending there. Neither the FHA nor the VA charge borrowers extra to finance a condominium or a co-op. You can get a condo loan with the same FHA or VA mortgage rate as you could a single-family home.