In Florida, you can be approved for a mortgage and still not be able to use it on the condo you want. That is because lenders do not just review you. They also review the building. If the condo association does not meet the standards set by Fannie Mae and Freddie Mac, the unit is considered non warrantable, and a standard conventional loan may not be available.
What Warrantable Means
A warrantable condo is in a building that meets the requirements Fannie Mae and Freddie Mac set for the loans they purchase. Most conventional mortgages are sold to one of them, so when a building does not meet those standards, most conventional lenders will not finance a unit there. Fannie Mae even keeps a status for projects it has reviewed, and a project marked unavailable is ineligible for its loans.
Common Reasons a Building Does Not Qualify
- Critical repairs. Needed repairs to structural parts of the building, such as the foundation, roof, or load bearing elements, that have not been funded or completed.
- Insufficient insurance. A master insurance policy that does not meet the required coverage.
- Litigation. Certain types of pending lawsuits involving the association.
- Hotel style operations. Buildings that operate like hotels or have heavy short term rental activity.
- Budget and reserves. Associations that do not set aside enough for reserves.
Why This Is Coming Up More Often
Florida’s newer condo safety laws require structural inspections and fully funded reserves for key building components in many associations. Those laws are making buildings safer, but they have also uncovered repairs that associations must now fund, often through large special assessments. Lenders review that information closely. We explained how the reserve rules affect buyers in our guide to buying a condo after the new reserve laws.
If the Condo Is Non Warrantable
It is not automatically a dead end, but your options change. Some lenders offer portfolio or non warrantable condo loans, which usually come with a larger down payment and a higher rate. Paying cash is another option. Just remember that the same financing limits will apply to your future buyer when you sell, which can affect resale value.
Check the Building Early
Ask your lender to review the building as soon as you are serious about a unit, before your inspection period is running out. Request the association’s condo questionnaire, budget, reserve study, structural inspection reports, and recent board meeting minutes. Those documents tell you whether the building is financeable and what costs may be coming.
Looking at condos in South Florida? Schedule a buyer consultation and we will help you screen buildings before you spend time on the wrong one.