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Non-Warrantable Condo
A condominium that doesn't meet conventional lending guidelines due to its HOA, ownership concentration, or other factors.
Definition
A non-warrantable condo is one that fails to meet the eligibility requirements of Fannie Mae or Freddie Mac, making it ineligible for conventional financing. Common disqualifying factors include high investor ownership concentration (over 50%), ongoing litigation against the HOA, a single entity owning too many units, excessive commercial space, or the HOA being under-reserved. Non-warrantable condos can still be good investments but require non-QM or portfolio lenders who accept the additional risk. Pricing is typically higher and LTV limits lower compared to warrantable condos.
How This Relates to DSCR Loans
DSCR lenders are one of the best financing options for non-warrantable condos. Since DSCR is a non-QM product, the warrantability issue is less restrictive, though pricing adjustments apply.
Related Terms
Condotel
A condominium unit within a hotel that can be rented out as a short-term accommodation.
HOA
A Homeowners Association that manages common areas and enforces rules, funded by mandatory member dues.
Non-QM (Non-Qualified Mortgage)
A mortgage that doesn't meet the Consumer Financial Protection Bureau's qualified mortgage standards.
LTV (Loan-to-Value)
The ratio of a loan amount to the appraised value of the property.
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