Are you contemplating buying a condominium in Florida? The first thing you will need to determine is whether you are buying a “Warrantable” or “Non- Warrantable” Condo.

Conventional Mortgage Rules for Condos

The majority of home buyers use what's known as "conventional" mortgage financing. This means that their loan is backed by one of two government entities -- Fannie Mae or Freddie Mac -- and that the loan meets the two group's minimum standards.

With respect to condominiums, Fannie Mae and Freddie Mac use the term "warrantable" to describe condominium projects that meet their criteria. Condo projects and properties which don't meet Fannie Mae and Freddie Mac warrantability standards are known as “non-warrantable”. Non-warrantable condos can sometimes be more challenging to finance.

Typically, a condo is considered warrantable if:

No single entity owns more than 10% of the units in a project, including the developer
At least 51% of the units are owner-occupied
Fewer than 15% of the units are in arrears with their association dues
There is no litigation in which the homeowner’s association (HOA) is named
Commercial space accounts are 25 percent or less of the total building square footage

Because of these rules, some of the common property types which fall into the non-warrantable category include condotels, time shares, fractional ownership properties, and other projects which require owners to join an organization, such as a golf club.

Mortgages for Non-Warrantable Condos

For buyers of non-warrantable condos, mortgage financing can be more of a challenge. There are fewer lenders available from which to get a loan. In general, a condo or co-op unit is considered non-warrantable if it shows any of the following characteristics:

It's in a project which has yet to be completed
It's in a project for which the developer has not turned over control of the HOA
It's in a project which allows for short-term rentals
It's in a project where one person owns more than 10% of all units
It's in a project where the majority of units are "rentals"

In addition, a condo unit in a project involved in litigation of any kind will typically be given "non-warrantable" status. This is true regardless of whether the building is suing another party, or is the party being sued. Non-warrantable condo financing is unavailable via Fannie Mae and Freddie Mac.