Financing When the Condo Project Does Not Meet Standard Guidelines
A condominium buyer may qualify for the mortgage while the project does not meet standard agency requirements.
I help buyers and real estate professionals identify the project issue early, determine what documentation is needed and explore whether a portfolio financing path may be available.
Three Things to Know
The project is reviewed separately from the borrower
Personal qualification does not guarantee that the condominium association or development will meet standard lending requirements. Both reviews must pass for standard financing to proceed.
The issue may not appear until late
Litigation, insurance, reserve levels, commercial space or ownership concentration can remain hidden until the project review begins — sometimes after an offer has been accepted.
Non-warrantable does not necessarily mean unfinanceable
A portfolio or specialized mortgage option may provide another path, depending on the borrower, property and project. The options depend on the specific issue and its severity.
Common Project Concerns
Any of these issues can cause a project to fail standard agency review. Some are correctable; others may require a portfolio financing path.
Borrower Review Versus Project Review
Both reviews must pass for standard financing. A strong borrower profile does not override a project that fails agency guidelines.
Borrower Review
Personal- Income
- Credit
- Assets
- Appraisal
- Occupancy
- Loan amount
Condo Project Review
Property- Insurance
- Budget and reserves
- Litigation
- Ownership concentration
- Commercial use
- Maintenance and safety
What to Gather
Collecting this information early allows the project review to begin before the financing deadline becomes a problem.
Common Questions
What makes a condo non-warrantable?
A condominium project becomes non-warrantable when it does not meet the guidelines required by Fannie Mae, Freddie Mac or other standard agency programs. Common issues include pending litigation, inadequate reserves, high investor concentration, excessive commercial space and short-term rental activity.
Can I still qualify if the condo is non-warrantable?
Personal qualification does not guarantee that the project will meet standard lending requirements. However, non-warrantable does not necessarily mean unfinanceable. A portfolio or specialized mortgage option may provide another path, depending on the borrower, property and project.
Can litigation prevent condo financing?
Pending or material litigation against the condominium association is one of the most common reasons a project fails agency review. The nature, scope and status of the litigation matter. Some litigation is minor and may not affect financing; other cases can make standard financing unavailable.
What does the condo master insurance need to cover?
Standard agency programs require the master insurance policy to meet specific coverage minimums for property, liability and, in some cases, fidelity. Gaps in coverage or inadequate limits can disqualify the project. A project review can identify insurance issues early.
When should I start the project review?
As early as possible — ideally before making an offer. Project issues can remain hidden until the formal review begins. Identifying a problem early gives more time to explore alternatives or negotiate contract terms.
Review the Project Before the Financing Deadline
Project issues are easier to address when identified early. A planning review can begin the project assessment before you are under contract.
Review the Condo ProjectMatt Siket · NMLS #442558 · Liberty Federal Credit Union, NMLS #518136 · Equal Housing Lender