Your client is super excited about the condo they are purchasing. Then you get the news that it has been flagged as non-warrantable. Do you dash their dreams? Please don’t. Contact a non-warrantable condo lender like Deephaven Mortgage.
While the news can be upsetting, it does not mean the deal is over and the originator who saves it comes out a hero! This positive experience could lead to referrals and perhaps a refinance down the road. Real estate investors need an originator who is ready to handle any challenge that comes up. Often times, that means pivoting to a non-QM loan solution that allows non-warrantable condos. Seasoned investors might inquire about your experience with condo deals before they will work with you. Chances are they have been turned away in the past by larger financial institutions where a non-warrantable condo isn’t an option. They don’t want to waste time with someone who doesn’t offer a full range of products to close their deal.
What is a non-warrantable condo?
A condo that is deemed non-warrantable means that it does not meet traditional guidelines and will not be bought by government-sponsored entities such as Fannie Mae or Freddie Mac. Private lenders offer non-QM that allow non-warrantable condos and serve credit-worthy borrowers who don’t meet the requirements of a traditional loan.
Why have guidelines become tighter in the Agency space?
Tighter lending policies have changed the landscape of condo requirements. Over the past three years stringent lending regulations were put into place temporarily, but later made permanent. These tighter guidelines were put into place to ensure that condo buildings were up to code and didn’t require major repairs. The GSEs, Fannie Mae and Freddie Mac, announced their Temporary Requirements for Condo and Co-op Projects that went into effect January 1, 2022, after the Champlain South Tower collapse in Florida.
In September of 2023, Fannie Mae announced an ongoing commitment to risk management of condos. They updated their requirements for condos which became a permanent version of the temporary regulations.
The result is an increased number of condos are now deemed non-warrantable. Many of these deals can be saved if they meet the requirements of a non-QM loan that allows non-warrantable condos. The key is partnering with a lender who understands the unique challenges posed by non-warrantable condos. Deephaven Mortgage are experts in navigating the process based on years of expertise with non-warrantable condo loans.
What are common reasons for a condo to be deemed non-warrantable?
Guidelines as to what is considered non-warrantable can vary, but here some of the reasons for a condo to become flagged:
- The property owner, HOA or developer is involved in litigation
- A high percentage of units are non-owner-occupied
- The developer has not turned over management of HOA to the owners
- The development is still under construction or is not yet completed
- The community allows short-term rentals
- More than 25% of the space is used commercially
How can non-QM provide flexible solutions for non-Warrantable condos?
Non-QM loans offer flexible guidelines for criteria such as income verification, credit requirements and non-warrantable condos. Non-warrantable condos are allowed across most of Deephaven’s products including Bank Statement loans, Non-Prime and our DSCR product for real estate investors.
Our guidelines allow loan to values (LTVs) up to 80% which is a down payment requirement of 20%. Loan amounts are up to $3.5 million. Our common sense underwriting allows for flexible requirements that provide a positive experience for your borrowers.
Become a non-QM pro for your borrowers ready for any challenge that comes your way including a non-warrantable condo.
Ready to become an approved partner to gain access to all our non-QM suite of products? Get started here: https://deephavenmortgage.com/become-a-partner/
