A borrower can have excellent credit, strong income, solid reserves, and an acceptable LTV — and still face a financing problem on a condo purchase. The reason is not anything wrong with the borrower. It is the building. Conventional condo underwriting evaluates two distinct files: the borrower and the project. When the project fails review, the loan fails regardless of how clean the borrower looks on paper.
At LendSure Mortgage Corp., our Non-Warrantable Condo program is built for exactly this scenario. Submit your scenario and we’ll provide a pre-qualification within 24 hours.
Two Underwriting Files, One Transaction
Fannie Mae’s Project Standards guidance states directly that the quality of mortgages secured by condo units can be affected by characteristics of the entire project, not merely the individual property. Before a condo loan can be delivered, the lender must determine that the project meets applicable eligibility requirements. That project-level review is separate from, and in addition to, the borrower review.
The two files a condo transaction requires:
File 1: The Borrower and Unit Credit, income, assets, reserves, occupancy, LTV, and unit-level characteristics.
File 2: The Building Master insurance, structural condition, HOA finances, litigation, ownership concentration, commercial space, short-term rental activity, special assessments, and project financial health.
Both files have to work. A strong borrower file does not compensate for a project that fails review.
What Makes a Condo Non-Warrantable
Physical and Financial Risk
Fannie Mae’s Ineligible Projects guidance identifies a detailed set of project characteristics that can make a condo loan ineligible for conventional purchase or securitization. The issues group into recognizable categories.
According to Fannie Mae’s Condo Status Finder data, insufficient master property insurance and critical repair issues have recently been the two leading reasons projects carry an ineligible status. A borrower’s individual unit coverage does not solve the master insurance issue — the project’s master policy addresses common elements and shared structures including the building, parking structure, and amenities. Those are two separate coverage questions, and both matter to the lender evaluating the collateral.
Ownership, Legal, and Use Risk
Beyond insurance and repairs, several other project-level characteristics can trigger a non-warrantable finding. Single-entity ownership above program thresholds — where one investor or entity controls too large a share of the project — can create concentration risk that affects project financing eligibility.
Significant litigation involving the HOA or the project may also disqualify the property, though Fannie Mae evaluates litigation based on the nature and potential financial impact of the matter rather than applying a blanket rule. A slip-and-fall dispute and a structural defect claim are very different risks.
Hotel-style operations, condotel characteristics, and certain short-term rental arrangements are also among the characteristics Fannie Mae identifies as problematic. A unit that generates strong Airbnb revenue may sit in a project that will not clear conventional review because of how the building operates overall.
Pre-Screen the Building Before You Package the Borrower
What to Identify Early
The most efficient thing a broker can do on a condo scenario is identify project-level issues before spending hours on borrower documentation. The following questions are worth answering at intake:
- What is the property address and project name?
- Is the project currently listed as eligible or ineligible in agency systems?
- Are there known critical repairs, active litigation, or outstanding special assessments?
- What is the approximate percentage of investor-owned units?
- Does the building have hotel-style operations, mandatory rental pools, or condotel characteristics?
- What is the approximate commercial space percentage?
A project with a known ineligibility reason should prompt an immediate conversation about non-warrantable options rather than a conventional submission that will decline at the project review stage. Our webinar Saving Your Condo Deals with Non-Warrantable Condo Loans walks through exactly how to identify and structure these scenarios.
“Limited Review” Does Not Mean “No Project Review”
Brokers sometimes assume that a loan qualifying for Fannie Mae’s Limited Review process means the project itself is not evaluated. That is not accurate. Projects undergoing Limited Review must still satisfy applicable project requirements and must not fall into the ineligible project categories. The review process determines how the lender evaluates the project, not whether the project is evaluated.
The HOA’s Financial Health Is Part of the File
Delinquency and Reserves
A borrower can pay every bill on time and still face a project-level financing problem if a significant share of other unit owners are delinquent on their HOA assessments. Fannie Mae’s Full Review requirements include a benchmark that no more than 15% of total project units may be 60 days or more past due on common-expense assessments. That is a project-level metric. The individual borrower’s payment history has no bearing on whether the project clears that threshold.
HOA reserve adequacy is a related concern. CFPB guidance explains that condo associations generally carry responsibility for shared structures including roofs and building systems. When a project’s reserves are insufficient to cover anticipated maintenance and repairs, lenders face a collateral question that has nothing to do with the borrower’s creditworthiness.
Special Assessments
A special assessment can affect both sides of the transaction. At the project level, a large assessment may signal major deferred maintenance or a capital shortfall in the HOA. At the borrower level, an outstanding assessment creates an additional recurring housing obligation that CFPB’s Ability-to-Repay rules recognize as a mortgage-related obligation in applicable circumstances.
Consider a 100-unit building facing a $2 million roof and structural project. The potential per-unit allocation before any unit-specific adjustments is $20,000. Underwriting may need to evaluate what the assessment covers, how much the borrower owes, whether it relates to critical repairs, and how it is being paid. Those are project-level questions that shape the borrower’s final qualification picture.
Project Issues Reference: What Brokers Should Obtain
| Project Issue | Why It Matters | What to Gather |
| Insufficient master insurance | Building may not meet collateral coverage requirements | Master policy or evidence of coverage |
| Critical repairs | Structural or safety risk to collateral | Inspection, engineering, or repair documentation |
| Special assessment | May indicate major project expense or repair | Assessment notice and payment terms |
| HOA delinquencies | Can weaken association finances | Condo questionnaire, current delinquency rate |
| Litigation | May create financial or project risk | Nature and current status of litigation |
| Single-entity concentration | Ownership concentration may exceed program limits | Unit ownership breakdown |
| Commercial space | Mixed-use exposure affects eligibility | Project composition and square footage |
| Condotel or STR characteristics | Project operation may violate program requirements | Rental and project management details |
| Inadequate reserves | May increase future assessment or repair exposure | HOA budget and reserve information |
| Project financial weakness | HOA may lack resources to meet obligations | Budget and financial statements |
How Our Program Evaluates Non-Warrantable Projects
Our Non-Warrantable Condo program evaluates each project individually rather than maintaining an approved condo list. That case-by-case approach means a project’s non-warrantable status is a starting point, not a conclusion. The question is which specific characteristic creates the agency ineligibility, and whether that characteristic falls within our program’s acceptable range.
Key program parameters: loan amounts up to $3,000,000, LTV up to 75%, up to 50% commercial space permitted, and new construction buildings permitted. Litigation is reviewed case by case, with the nature of the dispute carrying more weight than the existence of litigation itself. HOA reserve levels, concentration ratios, and project financial health are all evaluated in context. Our two-page Condo Questionnaire is significantly shorter than the seven-page Fannie Mae version, and we accept competitor questionnaires that answer the same questions.
Ready to Review a Non-Warrantable Condo Scenario?
A non-warrantable designation does not mean the property is unfinanceable. It means the project falls outside one or more standard agency requirements. The next step is identifying exactly which characteristic creates the issue and whether an alternative program can accommodate it.
Submit your scenario with the project name, address, unit details, condo questionnaire, and the known eligibility issue. Our team will assess the building before you spend more time packaging the borrower. Become an approved broker to access our full program suite and broker resources.
Frequently Asked Questions
What does non-warrantable mean??
A non-warrantable condo is one that does not satisfy one or more applicable conventional project eligibility requirements set by Fannie Mae, Freddie Mac, or FHA. The designation relates to the project, not the individual unit or borrower. A strong borrower in a non-warrantable project still needs an alternative financing program.
What are the most common reasons a condo project becomes non-warrantable?
According to Fannie Mae’s Condo Status Finder data, insufficient master property insurance and critical repair issues have recently been the two leading reasons for project ineligibility. Litigation, HOA delinquencies, condotel characteristics, and single-entity ownership concentration are also common factors.
Does every lawsuit involving an HOA make a condo non-warrantable?
No. Fannie Mae evaluates litigation based on the nature and potential financial impact of the matter. Minor disputes such as slip-and-fall cases are treated differently from structural defect claims or large financial exposures. Brokers should obtain the nature and status of any litigation rather than assuming the deal is not viable.
Can a non-warrantable condo still be financed?
Yes. Non-QM programs including our Non-Warrantable Condo program evaluate projects individually and can accommodate characteristics that fall outside conventional guidelines. The specific ineligibility reason determines whether the project qualifies for an alternative program, which is why identifying the issue early matters.
Title
The borrower’s individual unit policy covers the interior of their unit. The project’s master policy covers common elements and shared structures including the building, roof, parking structure, and amenities. Conventional lenders require adequate master coverage at the project level. A borrower can carry full unit coverage while the project fails the master insurance requirement.
How does a special assessment affect the loan?
At the project level, a special assessment may signal major deferred maintenance or a capital shortfall. At the borrower level, an outstanding assessment may create an additional recurring housing obligation that factors into qualification. Underwriting needs to understand what the assessment covers, how much the borrower owes, and whether it is related to critical repairs.
What is our Condo Questionnaire and how does it compare to the Fannie Mae version?
Our Condo Questionnaire is two pages and collects the project information our underwriting team needs to evaluate the building. The Fannie Mae version is seven pages with supporting documentation requirements. We also accept competitor questionnaires when they answer the same questions, which saves brokers time and avoids duplicate fees.
What LTV and loan amounts are available on our Non-Warrantable Condo program?
Our program supports loan amounts up to $3,000,000 and LTV up to 75% on purchases. Up to 50% commercial space is permitted, new construction buildings are eligible, and both DSCR and bank statement income documentation options are available.
