Non-Warrantable Condo Loan Options and Lender Solutions

Found the right condo only to learn it won’t qualify for conventional financing? You may need a non-warrantable condo loan.

Here are some non-warrantable condo loan options to consider.

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Northpointe Bank

Northpointe Bank approves non-warrantable condo loans for primary residences, vacation homes, or investment properties. You can qualify with income from work, from other rental properties, or both. 

• Down payment: 20%
• Credit Score: 660
• Max loan amount: $3 million
• Loan options: Fixed, adjustable, or interest only options available
• Occupancy: owner-occupied, second homes, or investment properties

Based in Grand Rapids, Mich., Northpointe also operates regional offices and can issue non-warrantable loans for condos nationwide.

MortgageDepot

MortgageDepot considers non-warrantable condo loan applications on a case-by-case basis. Its base loan requirements are a little more relaxed than Northpointe’s.  

• Down payment: 20%
• Credit Score: 620
• Loan options: Fixed or adjustable
• Occupancy: owner-occupied, second homes, or investment properties

The downside: Only buyers in the states of New York, Pennsylvania, Florida, Georgia, Maine, and Virginia can apply.

First National Bank of America

First National Bank of America specializes in non-QM and alternative mortgages, including non-warrantable condo loans.

• Down payment: 20%
• Loan options: Fixed, adjustable, or interest-only options available
• Occupancy: owner-occupied, second homes, or investment properties

Like a lot of non-QM lenders, this nationwide lender considers each loan request individually and can make exceptions.

Fidelity Home Group

Condo buyers in Florida can find flexible non-warrantable condo loan options through Fidelity Home Group of Orlando.

• Down payment: 20% for primary residences; 30% for investment properties
• Credit Score: 680
• Max loan amount: $6 million
• Loan options: Fixed and adjustable rates available
• Occupancy: owner-occupied, second home, or investment properties OK

This lender also offers a bank statement loan variation for its non-warrantable condo mortgage.

Blue Water Mortgage

Borrowers in New Hampshire, Maine, Massachusetts, Connecticut, Florida, and North Carolina can find non-warrantable condo loans through Blue Water Mortgage.

• Down payment: 20%
• Credit Score: 660
• Loan options: Fixed and adjustable rates available
• Occupancy: owner-occupied, second home, or investment properties

Like other non-QM lenders, Blue Water considers each application on its own merit. The lender doesn’t share much general qualifying criteria.

North Star Funding

North Star Funding underwrites non-warrantable condo loans in California, Colorado, Connecticut, Florida, Georgia, Illinois, New Jersey, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, South Carolina, District of Columbia.

• Down payment: 20%
• Credit Score: 660
• Loan options: Fixed and adjustable rates available
• Occupancy: owner-occupied, second home, or investment properties

North Star also considers each application on a case-by-case basis.

First Heritage Mortgage

Here’s one more option for buyers in Alabama, California, Colorado, Delaware, District of Columbia, Florida, Georgia, Maryland, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, or West Virginia.

First Heritage Mortgage doesn’t publish underwriting criteria. It considers non-warrantable condo loan requests on their own merit. 

What might make a condo non-warrantable?

If the condo you’ve chosen isn’t warrantable, it may still be a good condo to buy. A non-warrantable condo isn’t necessarily inferior to a warrantable condo. The term “non-warrantable” refers only to the financing process.

Non-warrantable condos are harder to finance because, for one reason or another, they don’t qualify for a conventional loan — one backed by Fannie Mae or Freddie Mac — or a government-backed FHA, USDA, or VA loan.

These reasons usually have to do with the condo complex. Your condo may be non-warrantable because:

• The tenant ratio is too high: Often, a condo development in which more than half of the units are occupied by renters, instead of by owners, is non-warrantable; this ratio of renters to owners varies by lender
• The condo is still being built: Condos must have a certificate of occupancy to qualify for a conventional or government-backed loan. In this case borrowers can get non-warrantable loans and then refinance into warrantable loans after the complex is fully built
• One person owns too much of the building: Usually, if one investor owns 10% or more of a complex’s units, individual units will need non-warrantable loans. One exception: The developer can keep 20% of the units if it has plans to rent them
• HOA problems: If more than 25% of a complex’s Homeowners Association members are behind on their dues, or if the HOA is being sued, you’d need a non-warrantable loan
• Too much commercial space: Mixed-use developments with more than 25% retail space will need non-warrantable condo loans

Why so many rules? Because unlike traditional homeowners, condo owners control only the inside of their home. For example, condo owners can’t control what happens to the parking lot, common areas, swimming pool, fitness center, and so on.

If those common areas fall apart, the value of each condo unit could plummet, and that would be bad for the lender as well as the borrower. A condo that follows all the rules is most likely to hold its value and can be considered warrantable.

Conventional condo requirements

Getting a conventional, warrantable condo loan has its perks. Borrowers can put only 3% to 5% down and qualify for lower interest rates. If this is a must-have for you, you’ll need to find a condo that meets conventional condo requirements.

Ultimately, Fannie Mae and Freddie Mac, the two huge government-sponsored mortgage buyers, will decide whether your condo qualifies for conventional borrowing. Fannie and Freddie’s condo rules can be hard to understand.

To assess warrantability, your lender may send this questionnaire to your condo’s developer or HOA. In general, the lender is looking for a condo development:

• Whose construction is 100% complete with no additional phases or annexations pending
• In which 90% of all units have been conveyed to unit purchasers, although the developer can retain up to 20% of the project’s units if it plans to rent those units 
• In which the HOA is under the control of residents and not the developer

If you need to find out quickly, why not ask around the complex — or ask your Realtor to ask around for you? If an informal survey shows most owners in the development have conventional loans, there’s a great chance your condo could get one, too.

FHA, VA, and USDA criteria for warrantability

Unlike conventional loans, FHA, VA, and USDA loans are insured by the federal government, allowing lower interest rates and down payments even for borrowers with qualifying challenges.

But like conventional loans, not just any condo can get approved for a government-backed loan.

FHA condo loans

FHA loans are specially designed to help people with lower credit scores make smaller down payments, and these advantages are available when you buy within an FHA-approved complex.

The FHA keeps a database of approved condo complexes. You can search it here.

To be FHA approved, a complex must be complete, and it must have:

• At least two units
• No more than 10% of units owned by one person or entity
• No more than 15% of HOA members behind on payments
• At least 75% of its floor space used for residences
• Appropriate insurance for the entire complex

An HOA has to apply for approval, so even if a complex meets all the FHA’s requirements, it won’t be approved if the HOA hasn’t completed the approval process.

There is an exception: Now, borrowers can seek FHA single-unit approval. That means an individual condo could be approved for an FHA loan even if the complex itself doesn’t qualify. 

VA condo loans

VA loans let military members and veterans buy with no money down, no annual fees, and competitive rates. Like the FHA, the VA has to approve a complex before it will approve a loan for a unit in the complex.

The VA is particularly concerned about HOAs that control who you could sell the condo to. If an HOA has “first right of refusal” on offers to buy condos, the VA won’t approve the loan.

In other ways, the VA’s rules resemble the FHA’s. The VA wants to see more than half of a complex’s units owned by their occupants, and it wants at least 85% of HOA members to be current on their dues.  

Use this VA lookup tool to find approved condo developments in your area — or you can look up condo projects separately. A status of “approved without conditions” or “approved with conditions” means you should be able to get your VA loan.

USDA condo loans

USDA loans help people with moderate incomes in UDSA-defined rural areas buy homes with no money down.

Usually, the USDA will approve a condo loan if the condo would be approved by the FHA or VA — or if the condo would qualify for a conventional loan. Learn more here.

Downsides of non-warrantable condo loan options

If a traditional mortgage loan can’t finance your condo, you still have plenty of non-warrantable condo loan options.

But non-warrantable loan options won’t work for everyone. Since non-warrantable lenders can’t share their risk with the government, they have to be more strict.

As you can see on the list above, this means requiring at least 20% down. Some lenders also want to see higher credit scores — 660 to 680 instead of 580 to 620.

One more thing to know: Warrantable loans are consumer products regulated by the Consumer Financial Protection Bureau. Non-warrantable loans don’t have these consumer protections built in. Make sure you understand your loan before agreeing to its terms.

If a non-warrantable loan won’t work for you, keep shopping until you find a condo that’s eligible for conventional or government-backed financing.

Is a non-warrantable condo loan right for you?

Not every condo complex fits the mold for traditional financing. But if you like the place and know for sure it’s the right investment for you, look into non-warrantable condo loan options.

Yes, you’ll pay more in interest and put more money down. But a non-warrantable loan can offer the flexibility you need — even if it’s just a temporary measure until you can refinance.