However, before committing to a purchase of this type of property, it is important to understand the differences between non-warrantable and warrantable condos, as well as the rules that apply to each.
Non-warrantable condos are condo units that do not meet the requirements set forth by Freddie Mac or Fannie Mae for financing. These condos are usually much cheaper than comparable warrantable condos, which can make them attractive to first-time buyers. The downside is that they are more difficult to finance, since most lenders will not offer loans on these properties. Furthermore, most lenders will not insure them, so if an owner defaults on their loan, the lender cannot recoup its losses through private mortgage insurance.
Warrantable condos are condo units that meet the requirements of Freddie Mac or Fannie Mae. These condos are generally more expensive than non-warrantable condos, but they are easier to finance and typically come with better rates. Additionally, lenders may also be willing to insure them, meaning that the lender can recoup its losses if the borrower defaults on their loan.
In order to qualify for a loan on either type of condo, buyers must typically pay a down payment of 20%. Furthermore, buyers must meet the lender’s additional requirements such as credit score, debt-to-income ratio, and income documentation. If a buyer does not meet these requirements, they may still be able to qualify for a loan, but they will usually have to put down a larger down payment amount.
For buyers looking to finance a non-warrantable condo, it is important to do research to find a lender who is willing to issue a loan for this type of property. These lenders typically include banks, credit unions, and private lenders. Some lenders may require higher interest rates than those offered for warrantable condos, so it is important to compare options before committing to a loan.
In conclusion, understanding the differences between non-warrantable and warrantable condos is crucial for homebuyers looking to invest in a condo. Non-warrantable condos may be cheaper, but they are more difficult to finance and may come with higher interest rates. Additionally, buyers will typically need to make a 20% down payment and meet the lender’s other requirements in order to qualify for a loan. It is important to spend time researching different lenders in order to find the best loan terms. By educating themselves on the details of financing non-warrantable condos, buyers can make sure that they get the best deal when purchasing their new home.
Non-warrantable condos are condos which do not meet the requirements of Freddie Mac or Fannie Mae for financing. Because of this, they are usually much cheaper than equivalent warrantable condos, making them attractive to first-time buyers. However, non-warrantable condos can be more difficult to finance due to most lenders not offering loans for these properties. Furthermore, lenders are often not willing to insure these properties, meaning that if an owner defaults on their loan the lender cannot recoup their losses. Warrantable condos, on the other hand, meet the requirements of Freddie Mac or Fannie Mae and are typically easier to finance and come with better rates.
In order to qualify for a loan on either type of condo, buyers must typically have a down payment of 20%, as well as meet the lender's requirements such as credit score, debt-to-income ratio, and income documentation. For non-warrantable condos, it is important to research lenders who are willing to offer loans for these properties, as they may require higher interest rates. Ultimately, understanding the details of non-warrantable condos is essential for buyers looking to make sure they get the best deal when buying their new home.
This article was contributed on Oct 10, 2023
