A non-warrantable condo fails a Fannie Mae project test, so the loan cannot be sold to the agencies. Portfolio and non-QM lenders still finance many of these units, usually with more cash down, deeper reserves and a rate premium.
Have you heard the phrase "non-warrantable" from a loan officer two weeks into escrow? If you are buying a condo, that one word can make the whole purchase feel like it is slipping away.
In most cases, the deal is still alive. What changes is who lends on it, how much cash you bring and what the lender wants to see from the building — and this guide walks through each of those pieces at the rule level.
What Makes A Condo Non-Warrantable?
"Warrantable" is lender shorthand for a project that meets Fannie Mae or Freddie Mac project standards, so the lender can sell the loan and warrant that it qualifies. When a building fails one of those standards, the loan cannot be delivered to the agencies, and the lender has to keep it or sell it to a private investor.
The governing list lives in the Fannie Mae Selling Guide at B4-2.1-03, Ineligible Projects, dated 08/05/2026 on the page as published October 7, 2026. Keep in mind that the unit itself can be in perfect condition — the test is about the project, its association and its finances.
The characteristics that most often trigger a non-warrantable finding include but are not limited to:
- Single-entity concentration. One investor, developer or entity owns more units than the guide allows. This is common in newer towers where a sponsor still holds unsold inventory or a fund bought a block of units.
- Commercial space. B4-2.1-03 states that "no more than 35% of a condo or co-op project or 35% of the building in which the project is located be commercial space or allocated to mixed-use." Mixed-use buildings with large retail or office podiums can cross that line.
- Litigation. Pending litigation tied to "the safety, structural soundness, habitability, or functional use of the project" makes a project ineligible unless it qualifies as minor. Construction-defect suits where the association is the plaintiff generally do not qualify as minor.
- Critical repairs. A project is ineligible with "any unfunded repairs costing more than $10,000 per unit that should be undertaken within the next 12 months." Mold, water intrusion and advanced deterioration are separate triggers.
- Hotel-style operation. Rental pooling, a hotel license on the association, or a name containing "hotel," "motel" or "resort" are hard ineligibility criteria. The guide treats units under 400 square feet and units without full-sized kitchen appliances as red flags that call for more review.
All of these are building-level facts that you, as the buyer, cannot fix before closing. That said, they are also the exact facts a portfolio lender will ask about, so knowing which one applies to your building tells you where the conversation goes next.
The Single-Entity Ownership Tiers
Single-entity ownership is the trigger buyers run into most in newer buildings, and the guide sets the limit by project size. The table below reproduces the tiers exactly as they appear in B4-2.1-03 (08/05/2026).
| Project size (per B4-2.1-03) | Maximum units one entity may own |
|---|---|
| Projects with 5 to 10 units that are part of a master association | 2 units |
| Projects with 11 to 20 units | 2 units |
| Projects with 21 or more units | 20% |
Note that the count excludes "units that are owned by the project sponsor or developer and are vacant and being actively marketed for sale," along with certain affordable-housing and workforce-housing units. A sponsor holding unsold, actively listed inventory therefore does not automatically sink the project.
The guide also allows a narrow waiver when the purchase reduces concentration. The single entity must own "no more than 49% of the units," be marketing units down to "20% or less of the project units," be "current on all HOA assessments," and the project must have "no pending or active special assessments."
The Association Finance Tests That Fail Quietly
Some buildings fail on the association's books rather than its ownership or structure. These tests sit in a different section — B4-2.2-01, Full Review Process, also dated 08/05/2026 — and apply when a lender performs a full project review.
The full-review eligibility table sets three thresholds that matter to buyers:
- HOA fee delinquency. "No more than 15% of the total units in a project are 60 days or more past due on common expense assessments." A building with a cluster of owners behind on dues can fail on this line alone.
- Special assessment delinquency. The same 15% and 60-day test applies "in the payment of each special assessment." This is why a newly levied assessment can push a building from warrantable to non-warrantable within a single budget cycle.
- Replacement reserves. The budget must fund "replacement reserves for capital expenditures and deferred maintenance that is at least 10% of the budget." An association that has been holding dues down by underfunding reserves will usually fail here.
If your building has a large assessment in progress, our breakdown of how special assessments affect a condo mortgage walks through how underwriters treat the assessment itself in your debt-to-income ratio. The project test and the borrower test are separate, and both have to clear.
Under Fannie Mae B4-2.2-01 (08/05/2026), a full-review project fails if more than 15% of units are 60+ days late on HOA dues or if reserves are under 10% of the budget.
Who Lends When Fannie Mae Says No
Two groups of lenders routinely finance non-warrantable units. Portfolio lenders — often banks and credit unions — keep the loan on their own balance sheet, while non-QM lenders originate loans for sale to private investors who publish their own guidelines.
Neither group is bound by B4-2.1-03. Each writes its own matrix, which is why one lender may decline a building that another approves the same week.
Portfolio lenders keep non-warrantable condo loans on their own books, and non-QM lenders sell them to private investors. Each sets its own down payment, reserve and building rules instead of following Fannie Mae.
Keep in mind that there is no single published "non-warrantable" standard to point to. The numbers below describe what these lenders underwrite to; the specific percentages come from each lender's current rate sheet and matrix, which you should request in writing.
Down Payment
Portfolio and non-QM lenders generally require more equity on a non-warrantable unit than an agency loan would on a warrantable one, because the collateral is harder to resell. The required figure varies by lender, occupancy, credit band and which ineligibility trigger the building has.
A primary residence usually qualifies at a lower down payment than a second home or investment unit. If the unit will be a rental, a DSCR loan for investment property is often the non-QM product that applies, and it qualifies on the unit's rent rather than your personal income.
Reserves
Reserves are liquid funds left after closing, measured in months of PITIA — principal, interest, taxes, insurance and association dues. Non-warrantable programs typically ask for more months than an agency loan, and some lenders scale the requirement by loan size.
Retirement and brokerage accounts usually count at a discount, while gifted funds may or may not count depending on the lender. Ask how each account type is valued before you move money.
Rate And Pricing Add-Ons
Non-warrantable loans price above agency loans, either as a higher note rate, discount points or both. The add-on reflects the lender's view of the specific building risk, so a single-entity concentration issue may price differently from active litigation.
Ask each lender to separate the base rate from the condo adjustment on its loan estimate. That makes it possible to compare offers line by line rather than by headline rate alone.
Income Documentation
Portfolio lenders often accept full documentation, but non-QM programs also allow alternative documentation. Self-employed buyers can review our guide to bank statement loans and the broader self-employed mortgage guide to see how those programs calculate qualifying income.
What The Condo Questionnaire Has To Show
Every condo loan starts with a project questionnaire completed by the association or its management company. Fannie Mae's own Form 1076 is described in B4-2.1-01, General Information on Project Standards (08/05/2026) as a form that "helps lenders collect data to determine condo project eligibility," and the guide notes that "this form is optional."
Portfolio and non-QM lenders often use their own questionnaire instead. In practice, they ask about the same categories the agency guide does, because those categories describe the building's risk regardless of who holds the loan:
- Ownership. Total units, units sold to owner-occupants, units held by the developer, and the largest number held by any one entity. This is where single-entity concentration shows up.
- Delinquency. How many units are 60 or more days past due on dues and on each special assessment. Lenders compare this against their own threshold.
- Budget and reserves. The current budget, the reserve line and the date of the most recent reserve study. A missing or stale reserve study is a common reason for a conditional approval.
- Litigation. Whether the association is a party to any lawsuit, with a description and copies of the complaint. Expect follow-up questions if the suit involves construction defects.
- Inspections and repairs. Recent structural or mechanical inspections and any outstanding repairs. B4-2.1-03 requires lenders to review a structural or mechanical inspection completed within "3 years of the lender's project review date."
- Commercial space and rentals. Square footage allocated to commercial use and any short-term rental or hotel-style arrangements.
- Insurance. Master policy coverage, deductibles and, where applicable, flood coverage.
Request the questionnaire as early as your contract allows. The association's answers determine which lenders can lend, so a slow management company is often the real timeline risk on a non-warrantable purchase.
Fannie Mae calls Form 1076 optional in B4-2.1-01 (08/05/2026). Portfolio lenders usually send their own questionnaire covering ownership, delinquency, reserves, litigation, inspections and insurance.
When A Non-Warrantable Building Is Still Unfinanceable
Some conditions push a building beyond what most portfolio lenders will accept. These tend to be the issues that affect whether the collateral is safe to occupy rather than how it is owned.
Examples include an active evacuation order — B4-2.1-03 treats the project as ineligible until the building is "deemed safe for occupancy" — and a special assessment tied to a critical repair that has not been remediated. Projects that are terminating or in insolvency proceedings also fall in this group.
Before you waive a financing contingency: confirm in writing which B4-2.1-03 characteristic caused the non-warrantable finding. A concentration or commercial-space issue is usually financeable through a portfolio lender; a structural, safety or insolvency issue often is not.
A Worked 2026 Example
The building and Fannie Mae thresholds below are drawn from the guide sections cited above. The purchase price, rate, down payment percentage, reserve requirement and monthly costs are illustrative assumptions, not quotes — your lender's matrix and rate sheet govern.
A buyer is purchasing a $400,000 unit as a primary residence in a 120-unit building. The questionnaire shows that one investment fund owns 30 units, which is 25% of the project.
Under B4-2.1-03, projects with 21 or more units are capped at 20% single-entity ownership, so 25% makes the project ineligible for Fannie Mae. The fund's units are occupied rentals, not vacant sponsor inventory being marketed for sale, so the exclusion does not apply.
The buyer takes the file to a portfolio lender. For this illustration, assume the lender's matrix calls for 25% down on a non-warrantable primary residence, 12 months of reserves and a 7.50% 30-year fixed rate.
| Line item (illustrative) | Amount |
|---|---|
| Purchase price | $400,000 |
| Down payment (assumed 25%) | $100,000 |
| Loan amount | $300,000 |
| Principal and interest (assumed 7.50%, 30-year fixed) | About $2,098 per month |
| Property taxes and insurance (assumed) | $650 per month |
| HOA dues (assumed) | $550 per month |
| Total PITIA | About $3,298 per month |
| Reserves (assumed 12 months of PITIA) | About $39,576 |
| Cash needed before closing costs | About $139,576 |
The principal-and-interest figure comes from standard amortization on a $300,000 balance at 7.50% over 360 months. The reserves stay in the buyer's accounts after closing; they are documented, not spent.
Two follow-up questions shape whether this deal improves: whether the fund is selling down its units, which might bring the project under 20% before a refinance, and whether a second portfolio lender prices the same building with a smaller down payment or a lower condo adjustment. Both are worth asking before the appraisal is ordered.
In this illustrative 2026 example, a $400,000 non-warrantable unit with an assumed 25% down and 12 months of reserves needs about $139,576 in cash before closing costs.
How Market And Location Change The Picture
Non-warrantable findings cluster in certain markets. Older coastal towers facing structural recertification and newer buildings with heavy investor ownership both produce them, which is why Florida buyers in particular should read our Florida condo financing guide and the South Florida condo market overview alongside this one.
High-price markets add a second layer. A unit above the conforming limit is already outside agency delivery, so the analysis overlaps with jumbo loan underwriting, where many portfolio lenders apply their own condo review regardless of warrantability.
Planning The Exit: Refinancing Later
Many buyers accept portfolio terms with the intention of refinancing into an agency loan once the building clears. That plan depends on the specific trigger being temporary, such as a sponsor selling out inventory or a lawsuit settling.
Remember that the building has to pass review again at refinance, and that the agency rate at that time is unknown. A refinance is a possibility to evaluate, not an assumption to build the purchase around — and some portfolio loans carry prepayment terms worth reading before you sign.
Questions To Ask Every Lender
When you compare portfolio and non-QM offers on a non-warrantable unit, the following questions keep the comparison honest:
- Which characteristic made the project non-warrantable? Ask for the specific B4-2.1-03 or B4-2.2-01 item so you can judge whether it is temporary.
- What is the minimum down payment for my occupancy and credit band? Get it from the matrix, not a verbal estimate.
- How many months of reserves, and which accounts count? Confirm how retirement and gift funds are treated.
- What condo adjustment is built into the rate? Request it as a separate line from the base rate or points.
- Does the loan carry a prepayment penalty? This matters if you plan to refinance once the building clears.
- Is the building already approved, or does it need a new review? A building the lender has recently approved can shorten the timeline.
Overall, a non-warrantable finding narrows your lender list rather than ending the purchase. With the trigger identified and the questionnaire in hand, you can decide whether the extra cash and rate add-on still make sense for this building.
For more on how a home loan fits into long-term net worth, see our piece on the mortgage as a wealth instrument. Your rate depends on credit, LTV, loan term, occupancy and the lender's view of the specific building.
This article is for informational purposes and is not financial / mortgage / contractor advice. Consult a licensed professional in your jurisdiction.