If you’re buying a condo, it’s important to make sure that the condo is on the Fannie Mae or Freddie Mac approval list. If the condo isn’t on this list, it could affect your ability to get a mortgage and will most likely mean higher interest rates. In addition to being on that list, there are other requirements that need to be met in order for a condo to be considered non warrantable condo by Fannie Mae or Freddie Mac.
Non warrantable lien
Now, you may be wondering what it means for a lien to be non warrantable condo. There are several ways for this to happen, but the most common is when there’s no title insurance policy in place at all.
The lender has not requested title insurance from the lender or escrow agent (usually to protect themselves from any liens against your condo). So, there will be no lien on the title.
The bank never paid for a policy in the first place because they didn’t ask for one and thus there was never one issued by an insurance company, who would have had to review any liens against your condo and issue a report before issuing coverage.
The other way this could happen is if your lender or escrow agent did request title insurance as part of their underwriting process; however, after closing day they later decide that they want out of paying coverage and cancel their policy request with the carrier (either at closing or after).
Condo not approved by Fannie Mae or Freddie Mac
If you’re not yet ready to buy, you might want to consider renting. If you are shopping for a condo and a lender tells you that your unit is non warrantable condo, it could mean that the lender has determined that it doesn’t meet certain requirements.
Non warrantable condo can be difficult if not impossible to finance with Fannie Mae or Freddie Mac mortgages. These lenders are two of the largest providers of mortgage loans in the country, serving as government-sponsored enterprises (GSEs) that guarantee most mortgages in America. They have strict guidelines for what constitutes an acceptable property as collateral against their loans, and they may not consider certain properties worth backing because they don’t meet those standards.
Owner occupied versus an investment property
The non warrantable condo association must be able to show that the unit was used as a primary residence for at least one year (in the last two years).
This is not always easy to prove, especially if it’s an investor who has just purchased his or her first condo. In this case, lenders will want proof of a steady stream of income coming in from rentals or other sources.
Properties with more than 49% commercial use
If your condo property has more than 49% of its square footage used for commercial purposes, the lender will likely consider it to be non warrantable condo. Commercial uses include:
- Restaurants, bars, and fitness centres
- Public libraries
- Hospitals and clinics
- Professional offices (doctors’ offices, lawyers’ offices)
- Saunas, steam baths, and spas
In contrast, residential condos are less likely to be considered non warrantable condo if they fall within certain criteria. For example:
Condos that have been used as rentals should still be considered warrantable so long as the tenant occupying them is paying rent at market value. This can help confirm that the rental income is enough for you to service your mortgage payments. However, if your condo has been a rental for years and there’s no indication of its being sold any time soon (such as it is listed on MLS), then you may need help from an experienced buyer’s agent when selling your property
Non warrantable land contract
In some states, a land contract is not considered to be a mortgage. For example, in California and Arizona, contracts for the sale of non warrantable condo must provide for payment of all or part of the purchase price through instalments. These types of contracts are often referred to as “land contracts” or “contracts for deed” and generally require that the seller transfer legal title to the buyer only after he or she has paid off all instalments due under that contract. When a bank purchases property on these terms and makes payments directly to a seller, it does not create an enforceable security interest in favour of either FHA/VA/USDA insured mortgages.
Non Warrantable Condo Criteria
There are a few things to keep in mind when determining if your non warrantable condo is. The property must be owner-occupied (not a rental). If the property is rented out and not the primary residence of the owner, it cannot be insured through WA State Housing Finance Commission.
The condo must be in a building of 50 units or less. While there may be some exceptions, this number is generally accepted as being the maximum number that can be insured by WSHFC without having to pay extra fees for insurance requirements under state law (RCW 50.80). This means that if you live in an apartment complex with 51 apartments or more, then you probably won’t qualify for help from WSHFC unless your landlord agrees to take on some of these costs themselves (which they may not do).
There are also certain restrictions on how many stories high the building can be along with how many units per floor are allowed by state law when it comes to purchasing insurance coverage through our program; most similar policies offered elsewhere will only cover homes that meet these qualifications as well, so if yours doesn’t conform then chances are good that someone else will have paid more money than necessary because their policy was made invalid due to one small mistake!
There are many reasons that a condo might not be approved for FHA financing. The most common include non warrantable condo, properties with more than 49% commercial use, and condominiums that have not been approved by Fannie Mae or Freddie Mac. However, if you’re looking to buy an income property then you may be able to get approval on your condo if it meets certain criteria such as being owner-occupied versus an investment property.