Condo projects are considered to be non-warrantable if they are not eligible to be sold to Fannie Mae or Freddie Mac. There are a number of reasons why a condo may be considered non-warrantable. A condo project that has similar facilities to a condo hotel may not be considered to be warrantable. A condo may also be considered non-warrantable if more than one person or company owns more than 10% of the total units.
It is more difficult to get a mortgage on a condo that is considered to be non-warrantable. Not all mortgage lenders will offer a mortgage on a non-warrantable condo and those that do may charge higher interest rates as they are considered to be a higher risk. Generally a mortgage on a non-warrantable condo will have an interest rate that is up to 2% higher than that on another type of property. Financing may only be available for 80% of the value of the condo.
A potential buyer should consider using a mortgage broker when trying to find finance for any condo project. They will be able to advice the buyer whether the condo project is warrantable or non-warrantable and then help them to find a mortgage based on this. It is worth noting that the seller may not be aware of the status of the condo as the building owner may not make this information public.
If the condo is non-warrantable then finding finance can be a challenge and a mortgage broker will have experience of dealing with this type of finance and can assist the buyer in finding the best deals. Most lenders that will consider lending on a non-warrantable condo are local banks and they will all have different lending criteria.
While finding a mortgage for a non-warrantable condo project can be difficult it is not impossible and using the services of a mortgage broker may make the process easier. The perception that it may be difficult to find a mortgage on a non-warrantable condo certainly should not be enough to deter a potential buyer that is interested in the condo.