October 1st, 2009 6:46 PM by Alan Martin
Some of you have asked me about
Non Warrantable Condos - these are condominiums that are not eligible to be sold to Fannie Mae or Freddie Mac because they DO NOT fit into one of the following three classes:CLASS I1. Developers control of the homeowners association has been turned over to the condo owners2. Project is not subject to additional phasing or add-ons which have not yet been completed3. All common elements and amenities must be fully installed, completed and in operation4. 70% of all units in the entire development must have been sold and or legally obligated to close5. 70% of all units in the entire development must have been sold to owner occupantsCLASS II1. Recent or current condominium conversions (from apartments)2. Homeowners association has been controlled by the unit owners (other than the developer) for less than two years3. Project is not subject to phasing or add-ons which have not yet been completed4. All common elements and amenities are fully installed, completed and in operation5. 70% of the units in the entire development must have been sold and/or legally obligated to close6. 70% of the units in the entire development must have been sold to owner occupants7. No more than 15% of the current unit owners are more than one month delinquent in payment of homeowners dues or assessmentsCLASS III1. Homeowners Association has been controlled by unit owners (other than developer) for at least one year2. Project is not subject to phasing or add-ons3. All common amenities are fully installed, completed, and in operation4. 90% of the units have been sold (owner-occupancy of at least 60%)A CONDO QUESTIONNAIRE MUST BE COMPLETED BY THE MANAGEMENT TO DETERMINE PROJECT ELIGIBILITY
For those who are considering purchasing Non-Warrantable condos, they should expect to pay higher interest rates on their mortgage loans. Because FNMA would not purchase mortgages secured by non-warrantable condominiums, many banks consider these condos to be more risky, and thus increase the interest rate accordingly.
Depending on the loan program you select, be prepared to have a down payment on the home. Most lenders will only offer low Loan-to-Value financing on non-warrantable condos.
We do not know of anyone offering loans onNon Warrantable Condos at this time. So Cash only buyers are able to take advantage of the outstanding deal that we can help them with