Warrantable versus non-warrantable has nothing to do with a written guarantee, issued to the purchaser of a condominium promising to repair or replace something. It has to do with the type of financing that the buyer can use to finance the purchase.
Fannie Mae and Freddie Mac use the term “warrantable” to describe condominium projects and properties against which they’ll allow a mortgage. A condo is considered warrantable if:
• no single entity owns more than 10% of the units in a project,
• at least 51% of the units are owner-occupied,
• fewer than 15% of the units are in arrears with their association dues,
• the homeowners association (HOA) is not named in any lawsuits,
• and commercial space accounts for 25% or less of the total building square footage
Condo projects and properties which don’t meet Fannie Mae and Freddie Mac warrantability standards are known as “non-warrantable”. In general, a condo unit is considered non-warrantable if:
• the project has yet to be completed,
• its developer has not turned over control of the HOA to the owners,
• the community allows short-term rentals,
• a single person or entity owns more than 10% of all units,
• or it’s in a project where the majority of units are rented to non-owners.
Just because a condominium property is considered “non-warrantable”, doesn’t mean there aren’t financing options available. They may just come with less attractive terms.
For more information on the warrantable status of the Galveston condo you are interested in, call the Galveston Condo Living Group today!