Why condo loans are different
With a house, the lender mainly evaluates you and the property. With a condo, it also reviews the association: its budget, reserves, insurance, any litigation, and how many units are owner-occupied, rented or held by a single owner. The association answers these questions in a condo questionnaire, and the lender uses the answers to decide whether the building is eligible.
Warrantable vs. non-warrantable
A warrantable condo is in a building that meets Fannie Mae and Freddie Mac guidelines, so it qualifies for standard conventional loans with the best pricing. Common reasons a building is non-warrantable:
- Underfunded reserves
- Critical structural repairs or significant deferred maintenance that haven’t been completed
- Large special assessments for safety or structural work
- Pending litigation involving the association
- One person or entity owning too many units
- Too much commercial space, or hotel-style operations such as a rental desk or short-term rental pool
- Inadequate master insurance coverage
Florida’s post-Surfside laws
After the Champlain Towers South collapse in Surfside in 2021, Florida passed laws that changed how condominium buildings are inspected and funded:
- Milestone inspections: condo buildings three stories or taller must have structural inspections once they reach set age thresholds, then again every 10 years.
- Structural integrity reserve studies: associations must study and fund reserves for key components such as the roof, structure, fireproofing, plumbing, electrical systems and waterproofing. Owners can no longer vote to waive or underfund those reserves.
- Disclosure: buyers are entitled to the inspection reports and reserve studies.
Many associations have raised dues sharply or levied special assessments to comply. Fannie Mae and Freddie Mac also won’t buy loans in buildings with unresolved critical repairs, so a building’s eligibility can change once work is finished.
Your options when a building doesn’t qualify
- Non-warrantable condo loans: portfolio and non-QM lenders finance buildings that don’t meet agency standards, typically with a larger down payment, often 20% or more, and a somewhat higher rate.
- FHA or VA: these programs keep their own lists of approved condo projects, and FHA can sometimes approve a single unit in a building that isn’t on the list.
- Cash now, refinance later: some buyers pay cash and refinance once the building finishes its repairs and becomes eligible again.
- Walking away: if the reports show major work ahead with no plan to pay for it, the right loan may be no loan.
What to ask for before you make an offer
- The latest milestone inspection report and structural integrity reserve study
- The current budget, reserve balance and any planned dues increases
- Special assessments, approved or under discussion
- Any litigation involving the association
- Rental rules, minimum lease terms, and the share of units that are rented
- The master insurance policy, and what your own HO-6 policy needs to cover
A lender who works South Florida condos can often tell you quickly whether a building has come up before. Ask before you write an offer, not after.
55+ communities and second homes
Age-restricted communities are financed like any other condo if the building qualifies. If you’re buying a seasonal home, a second-home loan usually has better terms than an investment property loan, as long as you use the unit yourself and don’t rely on renting it full time. Planning to rent it out? See investment property loans.
