Mortgage 1 has expanded the guidelines their Condo financing options. A condominium complex can be grouped into one of two mortgage categories warrantable and non-warrantable. A condo complex is considered non-warrantable when they fail to meet criteria by Fannie Mae and Freddie Mac to allow for a more traditional mortgage financing.
Factors that can create a non-warrantable condo development:
FHA and VA take much of the guesswork out of whether the condo can be approved or not through an approved complex list. While Mortgage 1 is ultimately responsible for approving applications, the FHA and VA need to approve each complex individually to allow conventional financing.
The other option is the “non-warrantable” financing option. That is normally kept by the initial lender as part of its investment portfolio. While the rates can be slightly higher for this type of financing the sale price of the condo is normally lower. Borrowers will typically provide a larger down payment sometimes as much as 30 percent.
The biggest concern for buyers of a non-warrantable condo is if it’s a good investment for their money. Fannie Mae and Freddie Mac require a lot of qualifications to consider a condo warrantable – and some of those red flags should make condo buyers carefully consider this type of purchase.