What exactly is a non-warrantable condo?
If you are considering purchasing a condo it is good to know that recently there have been some changes to the requirements of lending money through a conventional loan on a condo property.
A conventional loan is the most common and traditional of loans. These loans are those that are within the requirements set by Fannie Mae and Freddie Mac to be federally backed. In other words, the lender is able to sell the loan off instead of holding it in-house or finding a private investor to purchase the loan.
Fannie Mae and Freddie Mac are the largest purchasers of condo mortgage loans in the country. For them to purchase a loan it has to meet their requirements so a majority of lenders will try to stick within these requirements to make sure they are not holding onto mortgage loan products.
Recently these two large mortgage-backing giants set new requirements that condos must be under warranty to be eligible for a conventional loan. This change came after the catastrophic collapse of a condo building in South Florida. It was discovered that repairs were suggested to be made that continued to be put off. Issues arise in an approval when an inspection is done on the property and it is found that the condo association has not kept up-to-date with maintenance as well as other safety concerns with the building. This has led many condo buildings to be deemed unwarrantable.
Options a buyer has for financing a non-warrantable condo
If you are trying to secure conventional financing and find that the condo property is non-warrantable there are two options to move forward with your purchase. You can have the items in question fixed or find a lender that will offer a non-QM mortgage on what conventional lenders determine non-warrantable.
To find this type of mortgage loan it is a good idea to ask the advice of a local mortgage broker in the location where you plan to purchase a condo or condo building. Mortgage brokers are a great resource to tap into for essentially one stop mortgage shopping. They make it their job to know the current mortgage products on the market available for certain situations.
Additionally, you want to find a mortgage broker that specializes in non-QM mortgage products. Non-QM mortgages are those that are willing to lend money outside of the conventional parameters set by Fannie Mae and Freddie Mac and take on the risk of holding the loan in-house or finding their own investor to back it. Many times, non-QM mortgages give more freedom in qualifying for lending in special circumstances.
These are completely safe mortgage products that still check the borrower’s ability to repay the loan while offering them another option to finance their home or investment of an unwarrantable condo property and other types of properties. Many mortgage advisors have helped many borrowers in less than traditional situations to qualify for a reputable loan and make a real estate purchase they would otherwise be turned down for.