Condos, townhomes and HOAs
Warrantable vs non-warrantable condos
You can qualify easily for a conventional loan and still be told the condo you picked is not eligible. Lenders call that a non-warrantable condo. The causes are mostly about the project as a whole, and many can be spotted before you make an offer.
Reviewed November 2026 · Written for Buy Home Tips from the sources listed below
A conventional loan on a condo depends on two approvals. You have to qualify, and the project has to meet the standards of Fannie Mae or Freddie Mac, the companies that buy most conventional loans. When a project does not meet those standards, lenders call it non-warrantable, meaning a loan on a unit there cannot be sold to those companies in the usual way.
Warrantable is not a term in Fannie Mae's Selling Guide. What the guide has is a list. Section B4-2.1-03 describes project characteristics that make a condo or co-op project ineligible, and section B4-2.1-01 explains how lenders review projects.
The ineligible characteristics
Fannie Mae will not buy loans secured by units in projects with characteristics like these:
| Characteristic | What it means |
|---|---|
| Timeshare or fractional ownership | Owners share time or fractions of a unit |
| Excessive seller financing structures in new projects | Concessions or payment abatements beyond Fannie Mae's limits |
| Hotel or motel operation | For example, the HOA is licensed as a hotel, owners cannot occupy their unit for part of the year or must join a rental pool |
| Split ownership arrangements | Covenants that split ownership or limit an owner's use |
| Property that is not real estate | Such as houseboat projects |
| Continuing care facilities | Projects owned or operated as continuing care communities |
| Non-incidental businesses run by the HOA | Such as a restaurant, spa or health club, with exceptions |
| Too much commercial space | Nonresidential or commercial space above 35 percent |
| Mandatory memberships to outside-owned amenities | Required fees for amenities owned by an outside party, such as a developer-owned golf course |
| Pending litigation | Described below |
| Single-entity ownership above the limits | Described below |
| Critical repairs | Material deficiencies or significant deferred maintenance |
| Termination or insolvency | Projects being terminated or in insolvency proceedings |
A lender that believes a project has merit despite failing a requirement can ask Fannie Mae for an exception, but that is the lender's call.
Single-entity ownership
When one person, investor group, partnership, sponsor or corporation owns too many units, the project is ineligible. Fannie Mae's limits are:
- projects of 5 to 10 units that are part of a master association: no more than 2 units
- projects of 11 to 20 units: no more than 2 units
- projects of 21 or more units: no more than 20 percent of units
Units under rental or lease arrangements, including lease-purchase and rent-to-own, count toward the total. The section excludes some units from the count, such as vacant units the sponsor or developer is actively marketing for sale and certain units held for affordable or workforce housing.
Litigation
Fannie Mae lists projects as ineligible when the association or co-op corporation is named as a party to pending litigation, or when the sponsor or developer is named in litigation about the project's safety, structural soundness, habitability or functional use. Pre-litigation activity such as arbitration or mediation that is reasonably expected to become formal litigation is treated the same way. The section also allows minor litigation that does not affect safety, structural soundness, habitability or functional use in listed situations, such as neighbor disputes, cases the insurer is defending and covering, or cases whose expected costs stay within 10 percent of funded reserves. Your lender will review the details.
Spotting problems early
Many of these issues show up in documents you can request before or soon after making an offer:
- the condo questionnaire, such as Fannie Mae Form 1076, which asks about ownership concentration, commercial space, litigation and more
- association budgets, reserve information and minutes, which can reveal deferred maintenance and disputes
- the declaration and bylaws, which show rental restrictions, rental pools and amenity arrangements
Your agent can also ask whether recent buyers in the building used conventional financing.
If the condo is non-warrantable
- Portfolio loans. Some lenders keep non-warrantable condo loans on their own books. Expect different terms, which may include a larger down payment.
- FHA or VA. These programs have their own condo rules. HUD's FHA-approved condominium search shows approved projects, and FHA allows single-unit approval in some cases.
- Cash. A cash buyer does not need project approval, but resale may be harder if future buyers need financing.
- Walk away. Problems that make a building ineligible, such as litigation over structural issues, can also affect your costs as an owner.
The bottom line
A non-warrantable condo is one in a project that does not meet Fannie Mae's or Freddie Mac's standards. Fannie Mae's ineligible list includes hotel-style operation, too much commercial space, excess single-entity ownership, certain litigation and critical repairs. Get the questionnaire answers before you commit, and have a backup financing plan if the building does not qualify.
Before you offer on a condo
- Ask your lender whether it has reviewed the project before.
- Ask the association or manager for the condo questionnaire answers early.
- Ask whether the association is a party to any lawsuit.
- Ask how many units any one owner or entity holds.
- Ask about commercial space, rental rules and any hotel-style services.
- Ask whether any critical repairs or special assessments are pending.
Questions buyers ask
What is a non-warrantable condo?
An informal term for a condo in a project that does not meet Fannie Mae's or Freddie Mac's project standards, so a lender cannot sell the loan to them. Fannie Mae's Selling Guide lists ineligible project characteristics in section B4-2.1-03.
Can I get a mortgage on a non-warrantable condo?
Sometimes. Some lenders keep these loans in their own portfolios, often with different terms. An FHA or VA loan may be possible if the project meets those programs' separate rules.
Does pending litigation make a condo non-warrantable?
Often. Fannie Mae lists projects where the association is named in pending litigation, or where the developer is named in litigation about safety, structural soundness, habitability or functional use, as ineligible, with exceptions described in that section.
How much can one investor own in a condo building?
Under Fannie Mae's single-entity rule, no more than two units in projects of 5 to 10 units that are part of a master association or projects of 11 to 20 units, and no more than 20 percent of units in projects of 21 or more.
Sources checked for this page
- Fannie Mae Selling Guide B4-2.1-03: ineligible projects
- Fannie Mae Selling Guide B4-2.1-01: general information on project standards
- Fannie Mae Form 1076: condominium project questionnaire
- HUD: FHA-approved condominium search
Checked November 2026. Programs and limits change; confirm with the source before you rely on a figure.