What is a warrantable condo?

Kelley Vick

You’ve found the condo of your dreams, your offer is accepted, then your lender tells you they can’t give you a mortgage because the condo isn’t “warrantable.”  What the f**k does that mean? Here’s the deal…

When a bank makes a loan, they intend to eventually sell that loan on the secondary market — to Fannie Mae.  A non-warrantable condo is any condo that is not eligible to be sold to Fannie Mae because it doesn’t meet specific guidelines.  Lenders consider these properties to be more risky, and often either decline to lend altogether or increase interest rates accordingly.  In order to confirm a condo is warrantable, banks will require building management to complete a condo questionnaire — a document detailing, among other things, how many units are in the building, how many units each person owns, any pending litigation, and details on commercial space.

If a condo is warrantable, it will fit into one of the following three classes:

CLASS I

  1. Developers control of the homeowners association has been turned over to the condo owners
  2. Project is not subject to additional phasing or add-ons which have not yet been completed
  3. All common elements and amenities must be fully installed, completed and in operation
  4. 70% of all units in the entire development must have been sold and or legally obligated to close
  5. 70% of all units in the entire development must have been sold to owner occupants

CLASS II

  1. Recent or current condominium conversions (from apartments)
  2. Homeowners association has been controlled by the unit owners (other than the developer) for less than two years
  3. Project is not subject to phasing or add-ons which have not yet been completed
  4. All common elements and amenities are fully installed, completed and in operation
  5. 70% of the units in the entire development must have been sold and/or legally obligated to close
  6. 70% of the units in the entire development must have been sold to owner occupants
  7. No more than 15% of the current unit owners are more than one month delinquent in payment of homeowners dues or assessments

CLASS III

  1. Homeowners Association has been controlled by unit owners (other than developer) for at least one year
  2. Project is not subject to phasing or add-ons
  3. All common amenities are fully installed, completed, and in operation
  4. 90% of the units have been sold (owner-occupancy of at least 60%).
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