You found the right unit at the right price, your credit is solid, and you're ready to close. Then underwriting calls: the building isn't warrantable. Fannie Mae and Freddie Mac won't touch it, and your conventional approval evaporates. This scenario plays out daily, but it doesn't have to kill the transaction.
What makes a condo non-warrantable
Agency investors impose strict project eligibility rules. A building becomes non-warrantable when:
- · **Investor concentration exceeds the cap.** If more than 50% of units are non-owner-occupied—common in beach towers and downtown high-rises—Fannie and Freddie walk away.
- · **Active or threatened litigation.** A lawsuit against the HOA or developer, even if minor, triggers an automatic decline.
- · **Inadequate reserves.** Agencies require 10% of the annual budget in a reserve account; many newer or cash-strapped associations fall short.
- · **Mixed-use or commercial ground floor.** Retail tenants, offices, or hotels on-site often push total commercial space above the 25% threshold.
- · **Single-entity ownership.** One investor or developer holding multiple units can disqualify the entire project.
None of these conditions reflect your personal creditworthiness or the unit's physical quality, but they disqualify the collateral under conventional guidelines.
How Non-QM portfolio programs step in
Non-QM lenders hold loans in proprietary portfolios rather than selling them to Fannie or Freddie, so they write their own underwriting rules. A portfolio condo program evaluates the individual unit and borrower profile without requiring project warrantability. These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
You'll typically see:
- · **Rate premium of 75 to 150 basis points** over comparable agency pricing—call it 7.5% instead of 6.0% in a given market environment.
- · **Down payment of 20 to 25%**, occasionally higher if the investor ratio is extreme.
- · **Full income and asset documentation** in most cases, though bank-statement and asset-qualifier versions exist.
- · **Standard 30-year amortization**, with no prepayment penalty after year two or three.
The lender still orders an appraisal and reviews your complete loan file; the difference is that project defects alone won't sink the deal.
The Alliance take
Non-warrantable doesn't mean uninhabitable. Many high-quality buildings fail agency tests for reasons unrelated to structural soundness or financial viability. If you're buying in a resort market, a new development, or a mixed-use tower, check warrantability early—before you write an offer. When the conventional box won't fit, a portfolio Non-QM product keeps the purchase on track. You'll pay a rate premium for that flexibility, but you close on the unit you want rather than walking away empty-handed.
Ready to explore Non-QM condo financing? Start an application and we'll review your scenario within one business day.