Mortgage Options for Non-Warrantable Condos in Pennsylvania
When obtaining a mortgage to purchase a condo, you may hear about the condo being considered either Warrantable or Non-Warrantable.
When a condo is considered Warrantable, this means that the complex meets the property guidelines required of Fannie Mae and Freddie Mac, the two agencies that back up what we know of as Conventional Mortgages.
When you find out that a Condo is Non-Warrantable it changes your mortgage options. When a Condo is Non-Warrantable it means that Fannie Mae and Freddie Mac will not approve financing for the property. When we need to go outside of these Agencies, we will need to use a lender who is willing to “Portfolio” the loan, A Portfolio Loan is when a lender will hold the loan themselves and underwrite the loan based on their own criteria. A Portfolio Lender will not be beholden to the guidelines of either Fannie or Freddie.
Reasons a Condo May Be Classified as Non-Warrantable
One entity owns more than 25% of the units
Commercial space exceeds 25% of the property
Percentage of units held as Investment Properties exceeds 50%
Condo Association has pending litigation
Condo Association has limited Budget Reserves
Control of the Homeowners Association has not been turned over to the Residents
What types of Mortgage Options are Available for Non-Warrantable Condos?
Similar to eligible Condos, Non-Warrantable Condos can be financed with both fixed rates and adjustable rates. Often these programs do require a little more of a down payment (think 20%) and the interest rates are a little higher than could be expected for a Condo that meets all the Agency guidelines.
Can a Non-Warrantable Condo eventually be approved as Warrantable?
When a condo complex is deemed Non-Warrantable this doesn’t mean it will be locked into this status forever. It is common for Non-Warrantable Condos to eventually become eligible for a Conventional Mortgage when the reason for the ineligibility is eventually cleared. When this occurs, options can be explored to improve the mortgage terms of the condo owners.