A non-warrantable condo is a piece of property that is not approved by the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
Fannie Mae and Freddie Mac are both government-sponsored enterprises that determine what is considered warrantable and non-warrantable. These enterprises can buy mortgages from lenders and issue mortgage-backed securities.
Whether you’re a first-time home buyer or already know a thing or two about the real estate market, it’s vital to learn about what makes a condo non-warrantable. This way, when you apply for a mortgage loan, you’ll be able to relay that information to the lender and they can inform you of the necessary steps you should take in order to secure the loan.
Deviating from the Guidelines
There are certain standards that both Fannie Mae and Freddie Mac have set that constitute what they will and will not buy.
As listed by both Fannie Mae and Freddie Mac, some characteristics that dictate whether or not a condo would be eligible for financing include:
• Multi-Dwelling Units
• Hotel-like Management
• Mandatory Membership Fees
• In Litigation
• Unfinished Properties
• Run as a Continuing Care Retirement Community
So if you’re interested in a condo that fits one of these descriptions or any other ineligible attributes noted by Fannie Mae or Freddie Mac, it is considered non-warrantable.
An Ever-Changing Status
Something to keep in mind is that a non-warrantable condo today might not necessarily be non-warrantable tomorrow. This classification isn’t permanent. For instance, a property could be considered non-warrantable because it isn’t finished being built, but once construction commences, it may then be categorized as warrantable. Each condo is different and the way in which Fannie Mae and Freddie Mac perceive these properties changes. You could purchase a non-warrantable condo next month, look to sell it in a few years, and find out it’s now warrantable.
With the Right Help
Since non-warrantable condos do not meet the guidelines set by Fannie Mae or Fannie Mac, not all mortgage companies approve loans for people who are looking to buy this type of property as lenders use the money they receive from these enterprises to continue providing mortgage loans to home buyers. However, there are some who do not turn people away for this reason, including Contour Mortgage. You’ll not only learn more about what is considered non-warrantable and warrantable, but you’ll also be able to get pre-approved for a mortgage, secure funding and get help creating a financial plan that will greatly benefit you in the future.