Non-Warrantable Condo Loans:

Lending solutions for non-fannie approved condos

Why does warrantability makes a difference?

What exactly are non-warrantable condos you ask? In short, they are condominium units that don't pass the strict guidelines required by mortgage GSE's; Fannie Mae and Freddie Mac. You'll find most of them soaking up the sun in vacation hot spots like Miami, Hawaii, Vegas, San Diego as well as big cities. They're basically in places people want to flock to on a holiday or an extended business trip.

The big reason potential owners want to know if the condo is warrantable or not is because if it's warrantable it allows for traditional financing with the lowest interest rates and 5- to 10-percent down payment options for owner-occupants who qualify. Yet, any down payment under 20-percent on an FHA or conforming loan will still require mortgage insurance and increase your payment. The big difference is a nonwarrantable condo loan requires a larger down payment than a condo which is acceptable by conventional guidelines.

Condo vs. Non-warrantable vs. Condotel Down Payments
30-year Fixed Loan Type Warrantable Condo Non Warrantable Condo Condotel
Loan Assumptions: Borrower has a 720 credit score with qualifying income, employment and DTI ratios buying a condo. Buyers may have the option to buy the interest rate down. Not all borrowers will be approved.
Purchase Price: $620,000 $620,000 $620,000
Required Down Payment: 3.5-5 percent 10-15 percent 25-30 percent
Interest Rate: Excellent Approx. 1-1.5% more Approx. 1.25 to 2% more

What Makes a Condo Non-Warrantable?

The accepted checklist is extensive and has periodic changes but for the most part what's listed below has been the rule for decades. Learn more about it on Fannie Mae's condo guide.

    A condo may be deemed non-warrantable if:
  • - The project is still under construction
  • - There are pending litigation issues
  • - The owner-occupancy rate is under 50%
  • - The condo allows short-term rentals (daily and/or weekly)
  • - The developer has not turned over control to the HOA or owners
  • - A single person or entity owns more than 10% of the total units
  • - The HOA has ongoing structural problems in the building
  • - Greater than 25% of the units will be used commercially
  • - Ownership mandates a paid membership, such as a golf club

front of 3-unit property

upgraded kitchen in high rise condo

A recent condo transaction

A client relocating from Florida wanted to buy a condo in San Diego using traditional financing but was turned down by their bank due to:

The Challenges
- tenant occupancy of 56%
- pending litigation (owner and HOA regarding a leak)
- 1 year of income documentation.

Loan Overview
- purchase as a primary residence
- non-warrantable condo
- down payment: $400,000 (25-percent)
- loan amount: $1,200,000
- 742 middle FICO credit score
- 1 year of income documents

The end result? The pending litigation issue was given an exception by mgmt since it was for less than $3,000. The loan officer got the deal closed[1] for the buyer using a 1-year income program at an interest rate 1.0% above traditional financing.

How Do I Get a Mortgage for a Condotel?

A condotel is a building featuring condominium units that the HOA allows to be rented daily, weekly, and they may have a check-in desk for guests. Essentially, it operates the same as a hotel with short-term rentals exceeding the fifty-percent non-owner occupancy rule. Condotels, also called condo hotels, are a type of non-warrantable condo commonly found in vacation/resort areas like San Diego, San Francisco, L.A., coastal areas of Florida (Miami, Naples, Fort Lauderdale, West Palm Beach, Destin, Daytona Beach, Orlando and more), Hawaii, Vail & Aspen Colorado.

Benefits of Buying a Condotel

Right from the start you should be thinking of a condo-tel as an AirBnb concept. You're able to rent out your unit on a short-term basis and enjoy the income benefits of a unit that can now fetch as much as 4x the regular rent than if you had leased it as a long-term rental. The location is the determining factor so always do your own diligence prior to contacing a condotel mortgage lender.

condo in Miami Florida

Beachfront or Mountain Condo. We Can Help

  • Timeshares in Bldg?
  • Less than 500 sq ft?1
  • More than 35% Commercial Space?
  • More than 50% Renters or Investor Owns large number of units
  • No Junk fees!
  • $0 Application fee
  • $0 Loan processing

Pros & Cons of Owning a NON-warrantable Condo


- Higher Income. Unlike warrantable condos, the HOA usually doesn't restrict owners from listing their condo on sites like Airbnb or VRBO to take full advantage of short-term rental demand. We’re talking potential profits of $54K-$66K a year if you net $150-$200 a night and have strong demand. That's not too shabby of extra income for a condo that would only fetch $2,000 per month ($24K annually) if it were warrantable. The difference is more than 50% for a condo that isn't warrantable.
- Property Amenities. Additional benefits for owners or residents of a luxury condo building classified as not warrantable are amenities that are similar to a resort. Examples are state of the art fitness centers, small retail shops or restaurants, and commercial space covering more than 25-percent of the property.


Opting to own a non-warrantable means less financing options, lack of low down payment programs, higher interest rates, and selling in the future to someone who wants to use a VA, FHA or conforming loan is out of the question.
- Minimum Down Payment. Buyers of a non-warrantable condo need 10-15 percent down while buyers or investors of a condotel need 25-30-percent.

However, for many buyers in resort areas and vacation spots, the location and higher rental income from vacationers outweighs the cons and still makes it all worthwhile. For example, if you find a modern condo you love in the Little Italy neighborhood of San Diego that has a high occupancy of tenants to owners. Or maybe a high-rise condo in Houston's Museum District that you want to refinance but the HOA Bylaw's declare the building has 35-percent of it's space dedicated to commercial use, causing warrantability issues. In cases like these, a non-warrantable condo mortgage lender can provide financing when traditional banks won't.


See answers to questions borrowers also ask about an unwarrantable condo

Can a nonwarrantable condo eventually become warrantable?

Yes, absolutely. Over time as the condo association improves things like finishing construction, raising owner occupancy rates, resolving litigation or structural issues, or changing short-term rental and occupancy policies, it can potentially meet the requirements to be considered warrantable.

It's recommended that you check in with the condo board to see if they have plans in place to make those kinds of changes. It’s smart to keep tabs on their progress if warrantability is a serious concern to you down the line.

Is buying a non-warrantable condo a bad idea?

It's not a bad idea for everyone because many people do buy them and it turns out just as good as any condo or even better. Real estate is about location, no matter the type of property.

The most important thing to evaluate is whether the unit itself aligns with your financial goals and lifestyle. Lenders have warrantability guidelines to have the ability to sell the loans on the secondary market which reduces their risk. So although you might find a non-warrantable condo that seems like a good deal, take a deep dive into the details such as the ownership type, litigation status, and rental policies to determine if it's likely to suit your investment needs over time.

Most lenders do agree that buying a condo in a building which permits timeshares can be a bad investment choice. However, buying a condo with a fractional ownership in a very affluent area like Aspen, San Francisco or Manhattan may be worthwhile. Outstanding location tends to override negatives.

How can I check if a condo is non-warrantable before I make an offer?

The first person to ask is your lender rather than your real estate agent because over time the status may have changed from warrantable to unwarrantable or vice versa. Sometimes you're able to check the condo’s status with HUD.

What are the main problems with condos in general?

The HOA fees are what most complain about. All condo owners have to budget for homeowners association fees that cover building maintenance, repairs, improvements and amenities. Those monthly or quarterly fees definitely eat into your potential rental income if it’s an investment property.

Make sure you understand what's covered from your monthly dues and the rules about rate increases before buying. In many cases the HOA fees cover items that you would pay for in a home anyway such as lawn, trash, pool, and roof maintenance, internet and business center fees. In many cases, there’s also a fitness center and if it’s a luxury property, access to golf or tennis and even 24-hour security is likely. HOA fees are not always being paid for little in return.


1. View the disclosure disclaimer regarding loan approval, loan product availability and qualifying for a loan. Not All borrowers will qualify.