Non-Warrantable Condos: Why the Building Kills the Loan
Your credit is fine and your income is fine. The condo project failed review. Here is what triggers it and how to finance anyway.
Condo buyers are frequently blindsided a week before closing. The borrower sailed through underwriting and then the project review came back and the loan died. Nothing about you changed; the building simply failed a checklist.
The usual triggers
Pending litigation involving the association. More than a set percentage of units owned by investors. A single owner controlling too many units. Too much commercial square footage. Reserves below 10% of the budget. High delinquency on HOA dues. Any one of these can make an otherwise ordinary project non-warrantable.
Litigation is not all the same
Agency rules treat most litigation as disqualifying. Portfolio lenders look at what it is. A slip-and-fall covered by insurance is very different from a construction-defect claim against the developer that could result in an assessment. Bring the actual complaint and the insurance carrier's position, and a good lender will evaluate it.
How non-warrantable financing differs
Expect a somewhat larger down payment, often 15% to 25%. We're a broker. We shop hundreds of wholesale lenders on every file rather than selling one rate sheet. Terms are otherwise normal: 30-year fixed or ARM, standard escrows, no prepayment penalty on owner-occupied loans.
Check the project before you offer
Ask the listing agent for the HOA questionnaire, budget, and litigation disclosure during your inspection period. Ten minutes of review at that stage prevents the worst week in real estate, and if the project is non-warrantable, we can price it correctly from the start instead of scrambling at day twenty-five.
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