Warrantable & Non-Warrantable Condo Mortgage Loans

Demand for condos is increasing nationwide and getting approved for a mortgage just got a little easier.

Source: New Rules: Warrantable & Non-Warrantable Condo Mortgage Loans 

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Equity Prime - Michael Nelson  There is  confusion about  condo financing versus financing for detached single family residences.   I suppose this is why buyers and agents ask me about the financing differences between these two property types.

What is a warrantable condo and does it affect financing?

A warrantable condo satisfies Fannie and Freddie conventional financing guidelines.  Loans that satisfy Fannie and Freddie guidelines qualify for purchase and sale on the secondary market.  This is important because lenders buy and sell mortgages on the secondary market.

Equity Prime - Michael NelsonDo lenders think condos are more risky than detached homes?

Yes, condos are  more risky for a lender than a detached home.  The lender on a single unit shares some of the risk for the entire complex.   Because of this shared risk items such as liability, fire, foreclosed units, vacant units, and delinquent HOA fees are all risks carried by both the lender and the individual owner.  Before the lender will loan money for the condo, the lender does the research necessary to quantify the financial risk of the property.

What happens if the condo is non-warrantable?

Equity Prime - Michael NelsonA full service direct lender, such as Equity Prime, has access to a multitude of financial products.  There are products for both warrantable and non-warrantable condos.  Since the non-warrantable condo does not satisfy conventional guidelines the cost of financing will show increased risk.

Click on the article linked at the top of this blog for more information.  Gina Pogol wrote the article this past July and it appeared in Mortgage Reports.

If you are an agent working with buyers interested in condos, make sure you have done the research to determine the warrantability of the condo.  A qualified lender can give you guidance and a condo questionnaire.  The ownership of the condo complex provides the information for the questionnaire.  Once complete, the lender can send it to underwriting for evaluation.

If you are a buyer looking at condos, make sure you have the warrantability conversation with the agent early in the process.  Nothing is more heartbreaking to find the condo of your dreams only to have the financing fall through late in the approval process.

Please feel free to send me a text, call, or e-mail to continue the dialogue.  As always Happy House Hunting.

Mike
mnelson@equityprime.com
720.213.6260
@michaelfnelson2
NMLS: 1314188
Licensed in:

Michael Nelson - Equity Prime
California
Michael Nelson - Equity Prime, LLC
Colorado
Michael Nelson - Equity Prime, LLC
Florida

 

 

 

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