Denied Because the Condo Isn’t Warrantable?
Reviewed by Tanner Cook, NMLS #2090424 · Updated
Short answer
A warrantable condo is in a project that meets Fannie Mae and Freddie Mac standards. If the project doesn’t, conventional agency loans can’t be used, no matter how strong the buyer is. Common reasons include pending litigation, unfunded repairs, an underfunded HOA budget, one owner holding too many units, or hotel-like rental features. Some non-QM programs can finance non-warrantable condos, and FHA or VA may work if the project has their approval.
Why this happens
The project gets underwritten, not just you
On a condo, the lender reviews the whole project as well as your file. The HOA or management company fills out a questionnaire covering the budget, reserves, insurance, ownership, rentals, litigation and repairs. If the answers fall outside agency standards, the project is non-warrantable for conventional agency loans.
Common reasons a project fails
Typical problems include pending litigation involving the HOA, significant deferred maintenance or critical repairs, large special assessments, a budget that doesn’t set aside enough for reserves, too many owners behind on dues, one person or company owning a large share of units, too much commercial space, inadequate master insurance, and features such as a rental desk or mandatory rental pool that make it operate like a hotel. New projects where the developer still controls the HOA face extra review.
Safety and repairs get more scrutiny now
After the 2021 condo collapse in Surfside, Florida, Fannie Mae and Freddie Mac tightened their rules for buildings with critical repairs, unsafe conditions or significant deferred maintenance. Projects that passed review in the past can fail now, especially older mid-rise and high-rise buildings.
FHA and VA have separate approvals
FHA and VA keep their own lists of approved condo projects. A project can be approved for one and not the others, and FHA also has a single-unit approval path for some projects that aren’t on its list.
Ways we may be able to save it
Which of these fits depends on your full file and the program. None of them is a promise; each is something we check on a second look.
Non-QM non-warrantable condo programs
Some non-QM programs can finance condos that fail agency review, depending on the investor and the specific issue. They usually cost more and may require a larger down payment, and some problems, such as serious safety concerns, rule out most lenders.
Check FHA and VA approval
If the project is FHA- or VA-approved, or the unit can get FHA single-unit approval, an eligible buyer may be able to use that program instead. Whether a single-unit approval can be pursued depends on the lender and the project.
FHA loan basicsGet the facts straight from the HOA
Questionnaires are sometimes outdated or answered incorrectly. If the litigation settled, the special assessment was collected or the reserves were funded, an updated questionnaire, budget or attorney letter may change the result.
Pre-check the next condo before the offer
Our scenario desk can review a project’s documents before you make an offer, so you know which loan types fit that building before you’re under contract.
What to send us
Gather what you can from this list. You don’t need every item to start the conversation.
- The denial notice or the lender’s condo review findings
- The completed HOA questionnaire
- The HOA budget, latest balance sheet and reserve study, if available
- The master insurance policy declarations
- Any letters about litigation, special assessments or major repairs
- Recent HOA meeting minutes
- Your purchase contract and the listing details
For real estate agents
Condo denials are usually about the building, not the buyer, and they tend to surface late. Before writing an offer on a condo, get the HOA documents and ask about litigation, assessments and repairs. Send them to me and I’ll tell you which loan types that project can work with, so your buyer doesn’t find out halfway through escrow.
Send me the scenarioHonest limits
A buyer can’t fix the building. If the project has serious structural or safety issues, litigation no investor will accept, or insurance gaps, financing may not be available until the HOA resolves them. Some buyers in that spot pay cash or choose a different building.
Frequently asked questions
What does non-warrantable mean for a condo?
It means the condo project doesn’t meet Fannie Mae and Freddie Mac eligibility standards, so it can’t be financed with a conventional agency loan. The term describes the project, not the unit or the buyer.
Can I get a mortgage on a non-warrantable condo?
Sometimes. Some non-QM programs finance non-warrantable condos, depending on the investor and the reason the project failed. FHA or VA may also work if the project has their approval. Expect higher costs and more documentation than an agency loan.
How can I find out if a condo is warrantable before making an offer?
Ask the listing agent for the HOA questionnaire, budget, insurance and any notices about litigation or assessments, and check whether the project appears on the FHA or VA approved lists. A loan officer can review the documents against agency standards before you commit.
Is a condotel the same as a non-warrantable condo?
A condotel, a condo that operates like a hotel with a front desk or rental pool, is one common type of non-warrantable project. Financing options for condotels are narrower than for most other non-warrantable condos.
Why was I approved, and then the condo was denied?
Your approval and the project review are separate. Lenders often review the project after your credit and income, sometimes only once the HOA returns the questionnaire. That’s why condo problems tend to show up late.
Related denial reasons
See all 12 denial reasonsGet a second look at your file
Answer a few questions or reach Tanner Cook directly. You’ll get a straight answer on whether your file looks fixable and what it would take.
Not a commitment to lend. All loans subject to credit approval, verification and underwriting. Cornerstone First Mortgage, LLC NMLS #173855.