Wholesale Mortgage Condo Financing 2026: Warrantable vs Non-Warrantable Loans

What Are Fannie Mae & Freddie Mac Warrantability Requirements?

Fannie Mae and Freddie Mac — the two government-sponsored enterprises (GSEs) that purchase conventional mortgages from lenders — set the warrantability standards that determine whether a condo project qualifies for conventional financing. These standards exist because the GSEs need assurance that the project is financially stable, properly managed, and maintains value over time.

The Federal Housing Finance Agency (FHFA) oversees both Fannie Mae and Freddie Mac. Their warrantability framework evaluates six primary categories:

• Owner-occupancy ratio (50%+ required): At least half of units must be owner-occupied. This ensures the community is stable and that homeowners have a vested interest in maintaining the property. Projects dominated by renters present higher risk.
• Single-entity ownership limits (20% maximum): No individual, corporation, or entity can own more than 20% of the total units. This prevents investor concentration that could lead to bulk selling, rental dominance, or undue influence over HOA decisions.
• HOA financial health: The HOA budget must allocate adequate funds to reserves (typically 10%+ of total budget), maintain delinquency rates below 15%, and demonstrate financial stability through balanced budgets and no reliance on special assessments.
• Litigation status (no pending suits): Active or pending litigation against the HOA — including construction defect claims, slip-and-fall lawsuits, or contractual disputes — triggers non-warrantable classification. Even frivolous lawsuits can disqualify a project until the litigation resolves.
• Commercial space limits (under 35%): The total square footage dedicated to commercial, retail, or non-residential uses must be less than 35% of the project's total area. Mixed-use projects exceeding this threshold require alternative financing.
• Insurance requirements: The master insurance policy must provide hazard coverage, general liability (at least $1 million per occurrence), and fidelity/crime coverage. Flood insurance is required in FEMA-designated flood zones.

When all six categories pass review, the condo is classified as warrantable and eligible for conventional financing with standard pricing. When any single category fails, the entire project becomes non-warrantable — and every unit in that project requires alternative financing.

How Do FHA & VA Condo Approval Processes Work?

FHA and VA each maintain their own approved condo project lists, separate from Fannie Mae's warrantability standards. Understanding these approval paths is critical because a condo may be warrantable but not FHA-approved, or vice versa.

FHA Condo Approval

The FHA maintains a searchable database of approved condo projects. For projects not on the approved list, the FHA introduced expanded single-unit approval (commonly called "spot approval") guidelines. Under spot approval, individual units in unapproved projects can qualify for FHA financing when:

• The project has been completed and is not new construction with less than the required presale threshold
• At least 50% of units are owner-occupied
• No more than 50% of units have FHA-insured mortgages (concentration limit)
• The HOA is financially solvent with no significant delinquency
• The project carries adequate insurance coverage

FHA spot approval expanded access to condo financing for buyers using FHA loans (3.5% down payment). Your wholesale broker can determine whether a specific unit qualifies under spot approval guidelines — this analysis requires reviewing the HOA questionnaire against FHA-specific criteria.

VA Condo Approval

The VA maintains its own approved condo project list. VA-eligible veterans can only use their VA loan benefit to purchase condos in VA-approved projects. The VA approval process evaluates many of the same factors as conventional warrantability but applies VA-specific standards for insurance, management, and financial health.

If a condo project is not VA-approved, the HOA or a VA-approved lender can submit the project for approval. This process typically takes 4-8 weeks and requires detailed project documentation. Your wholesale broker coordinates this submission process with the VA and the HOA management company.

What Non-QM & Portfolio Options Exist for Non-Warrantable Condos?

When a condo project fails warrantability — regardless of the reason — conventional, FHA, and VA financing are unavailable. This is where the wholesale channel provides decisive value. Through our 200+ lender network, we access multiple categories of non-warrantable condo financing:

The common thread across these programs is that they are not available at retail banks. Banks originate conventional loans they can sell to Fannie Mae and Freddie Mac. When the condo project does not meet GSE standards, the bank has no product to offer. Wholesale brokers access the lenders that specialize in exactly these scenarios — and because we work with dozens of non-warrantable condo lenders, we can find the program with the most competitive pricing for each specific situation.

What Is the HOA Questionnaire & Why Does It Matter for Condo Financing?

The HOA questionnaire (also called the condo questionnaire, project certification, or lender questionnaire) is the single most important document in any condo financing transaction. This document, completed by the HOA management company, provides every data point lenders need to determine project eligibility.

A standard HOA questionnaire includes:

• Total units and owner-occupancy breakdown: Number of owner-occupied units, renter-occupied units, and vacant units
• Unit ownership concentration: Whether any single entity owns more than the allowable percentage of units
• Litigation disclosure: Any pending, threatened, or settled lawsuits involving the HOA within the past several years
• Financial statements: Current budget, reserve balance, delinquency rate, and any pending or recent special assessments
• Insurance declarations: Master policy details including hazard, liability, fidelity, and flood coverage amounts
• Commercial space information: Percentage of the project dedicated to non-residential uses
• Management company details: Contact information, management agreement status, and professional licensing
• Project phasing: Whether additional phases are planned and how they affect the existing project

HOA questionnaire fees typically range from $150 to $500, paid by the buyer. The questionnaire usually takes 5-10 business days to complete. We recommend ordering it as early as possible in the transaction — ideally during the escrow period — because the information it contains determines which lenders can finance the purchase. A delay in receiving the questionnaire can delay the entire closing process.

Why Do Wholesale Brokers Solve Condo Financing Problems Banks Cannot?

The structural reality of condo financing is that a significant percentage of condo projects fail at least one warrantability criterion. According to the Consumer Financial Protection Bureau (CFPB), condominiums represent a meaningful share of housing inventory in urban and suburban markets — yet conventional condo financing availability depends entirely on project-level factors that individual buyers cannot control.

This creates a common scenario: a qualified buyer with strong credit, stable income, and sufficient down payment is unable to obtain financing at their bank because the project fails warrantability — not the borrower. The bank has no alternative product to offer because their loan programs are limited to what they can sell to the GSEs.

Wholesale brokers solve this problem three ways:

• Non-warrantable condo lender access: We maintain relationships with 20+ lenders that specifically finance non-warrantable condos. Each has different guidelines — one may accept litigation-pending projects while another specializes in low-owner-occupancy buildings. We match the project's specific non-warrantable trigger to the lender most likely to approve it.
• Condotel and hotel-condo expertise: Condotel financing is a niche that requires specialized lenders. These programs evaluate the unit's rental income potential, the hotel operator's financial health, and the property's tourism market. Banks do not offer these programs — they exist exclusively in the wholesale and private lending channels.
• DSCR for investment condos: Investors purchasing condos in non-warrantable projects can use DSCR programs that qualify based on rental income rather than personal income. This is particularly valuable in California coastal markets where many desirable condo projects have low owner-occupancy ratios due to vacation rental demand.

The bottom line: if a bank declines your condo purchase, it does not mean the condo is unfinanceable. It means the bank's product menu is too limited. A wholesale broker with access to 200+ lenders — including condo specialists — has the tools to find a solution.

People Also Ask: Condo Mortgage Financing

Frequently Asked Questions: Condo Mortgage Financing