What Is a Non-Warrantable Condo? Everything You Need to Know Before Buying

When shopping for a condo, buyers often focus on location, price, and amenities. But there’s another important factor that can significantly impact your ability to finance the property: whether it's warrantable or non-warrantable. If you're unfamiliar with these terms, you're not alone — many first-time buyers are caught off guard during the mortgage process when they discover their dream condo is considered a non-warrantable condo.

So, what exactly is a non-warrantable condo? And why does it matter? In this article, we’ll break it down in simple terms, explain how it affects financing, and share what you can do if you’re considering buying one.

What Does "Non-Warrantable" Mean?

A condo is considered non-warrantable when it doesn’t meet the lending guidelines set by Fannie Mae or Freddie Mac — the two government-sponsored enterprises (GSEs) that buy most U.S. residential mortgages from lenders. These guidelines are in place to protect lenders from risk.

Some common reasons a condo might be labeled non-warrantable include:

Too many units are owned by one person or entity (usually more than 10%)

More than 50% of the units are rented out

The homeowners association (HOA) is involved in litigation

Inadequate reserves in the HOA's budget

Ongoing construction or incomplete phases in the development

Non-residential space makes up more than 25% of the property

These factors raise red flags for lenders because they may indicate financial instability or legal risks.

Why Is Financing a Non-Warrantable Condo More Difficult?

Lenders are cautious when it comes to non-warrantable properties because these loans can't be sold to Fannie Mae or Freddie Mac. That means the lender either has to keep the loan on their books or find a private investor willing to take it on — both of which carry higher risks.

As a result:

Interest rates are often higher

Down payment requirements are larger (sometimes 20-30%)

Fewer lenders are willing to approve the loan

Loan processing may take longer and involve stricter documentation

Who Buys Non-Warrantable Condos — and Why?

Despite the extra hurdles, non-warrantable condos can still be a great investment or residence for the right buyer. Investors may see an opportunity in high-rental properties, while some buyers are simply drawn to unique buildings in popular urban areas — especially in places like downtown Phoenix, Scottsdale, or Chandler, AZ — where many boutique condos fall into this category.

The key is understanding the risks and being prepared for the financing differences.

How to Finance a Non-Warrantable Condo

If you're set on buying a non-warrantable condo, your best move is to work with a lender that specializes in non-traditional financing solutions — like X2 Mortgage.

We offer flexible loan options designed for complex property types, including non-warrantable condos. Our team understands the nuances of condo approval and can guide you through each step, making the process as smooth as possible.

Here’s what you can expect:

Customized loan solutions based on your financial profile

Clear explanation of the condo’s status and why it’s non-warrantable

Assistance in navigating HOA documentation and legal details

Fast, transparent communication to avoid delays

Working with experienced professionals can make all the difference in getting your loan approved — and avoiding last-minute surprises.

Tips Before Buying a Condo

Whether the condo is warrantable or not, here are a few tips to keep in mind:

Ask upfront if the condo is warrantable.

Review the HOA documents carefully — especially the budget, reserve study, and insurance coverage.

Check for pending litigation or high rental ratios.

Work with a lender who understands condos — not just single-family homes.

Final Thoughts

Buying a condo is a big decision — and discovering your property is a non-warrantable condo doesn’t mean it’s a bad choice. It simply means you need to approach it with the right knowledge, strategy, and lender. With expert guidance from a team like X2 Mortgage, you can still secure competitive financing and move into the home or investment property you’ve set your sights on.

If you're exploring condo options in Arizona or beyond, and want to make sure your financing stays on track, reach out to our team today. We’ll help you navigate every detail with confidence.