Warrantable vs. nonwarrantable condominium
Question: I am trying to learn what makes a condo warrantable vs. nonwarrantable. Can you help me?— Jonathan D.
Answer: The answer is condominium, co-op and planned unit development (PUD) projects with particular attributes can be riskier than other types of development projects. The United States Department of Housing and Urban Development has regulations that must be satisfied by a developer before Freddie Mac or Fannie Mae will purchase a consumer mortgage loan secured by a unit in certain condominium projects.
Projects that do not qualify
Here are the conditions a condominium project might contain that would prevent an individual unit buyer from obtaining a mortgage should the lender sell on the secondary market. The conditions present to restrict a mortgage loan are based on too much risk or an investment orientation. Projects that are not eligible:
How to find a loan for a non-warrantable project
A consumer looking to mortgage a unit in a nonwarrantable project may consider an “in-house” or “portfolio” mortgage lender. The commonality between such lenders is the “portfolio” loan is kept in-house or sold to another investor that will keep the credit.
A portfolio loan is often a regional or more local lender such as a small bank or credit union. They might have the advantage to provide more flexible terms and conditions because they are not making the loan based on subscribing to HUD’s guidelines.