Can You Get a Conventional Loan on a Non-Warrantable Condo?

The Quick Read: Usually not an agency-backed one. If the building fails Fannie Mae or Freddie Mac project standards, a loan on a unit inside it cannot be sold to either one. Some lenders still finance these units with portfolio or non-QM loans they hold or sell outside the agencies. Those loans are not agency conventional loans, and they typically ask for more cash down, stronger reserves, and higher cost. Rules in this area have been changing, so confirm current guidelines before you rely on any detail below.

What Does “Non-Warrantable” Actually Mean?

“Non-warrantable” is industry shorthand for a condo project that fails agency eligibility standards. The agency guides do not use the word. They say “ineligible projects” and “project eligibility.” The idea is the same: the building, not you, did not pass.

A “warrantable” condo is one whose project meets Fannie Mae or Freddie Mac standards. Lenders can sell loans on those units to the agencies. A non-warrantable condo cannot be sold that way, so most conventional lenders will not touch it.

Here is the part that surprises buyers. Your credit, income, and down payment can all be strong, and the loan can still fail. The problem sits at the project level, and it affects every unit in the building.

Why Does the Building Matter More Than Your Credit?

Because the agencies are buying the loan, and the loan is secured by a unit that depends on the health of the whole association. A building with shaky finances, heavy litigation, or unsafe conditions puts every unit’s value at risk.

Fannie Mae will not purchase loans on units in projects with certain ineligible characteristics. Projects marked “Unavailable” in its Condo Project Manager tool, or on the Desktop Underwriter findings report, are ineligible for purchase under Fannie Mae’s Selling Guide. Freddie Mac keeps a similar list. Its ineligible project types include:

• Condo hotels
• Timeshares
• Projects with excessive commercial space
• Projects in litigation
• Projects with excessive single-investor concentration
• Projects needing critical repairs or under an evacuation order
• Projects that are terminating or insolvent

Your credit score and your down payment cannot fix any of these. The project test is separate from your personal test.

So Can You Get a Conventional Loan on One?

It depends on what you mean by “conventional.” Conventional simply means not government-insured. That label covers two different things in practice.

Watch the wording when you shop. Some lenders call their in-house loan “conventional” because it is not government-backed. That is not the same as a loan that meets agency guidelines. Ask directly: “Is this loan eligible for sale to Fannie Mae or Freddie Mac?” If the answer is no, you are looking at a specialty loan, and the terms will reflect that.

One thing does not change with the label. Non-QM and portfolio loans are still underwritten. The CFPB’s Ability-to-Repay rule requires the lender to make a reasonable, good-faith determination that you can repay, using reliable third-party records. Non-QM does not mean “no income check.”

What Triggers the Status, and Can It Be Fixed?

Some triggers can change over time. Others are built into the project. This table shows the difference.

Some of the details are worth knowing. Freddie Mac tests delinquency: no more than 15% of units may be 60 or more days behind on HOA assessments, and the same limit applies to each special assessment. Fannie Mae calculates regular and special assessment delinquency separately, per its Project Standards Requirements FAQ.

On reserves, the budget must show the required replacement-reserve allocation. A special assessment cannot stand in for it. Fannie Mae has been raising its reserve expectations, which pushes associations toward bigger reserve contributions. That can mean higher HOA dues for you.

Investor concentration deserves its own note. Freddie Mac still lists excessive single-investor concentration as ineligible, with a purchase exception when the sale reduces the concentration. Fannie Mae’s treatment of established projects has loosened, and the two agencies are not identical. The details moved in 2026, so ask your lender which agency standard applies to your building today.

What Changed in Condo Rules Recently?

Fannie Mae’s Lender Letter LL-2026-03, issued in March 2026, updated project standards and insurance requirements. Fannie Mae said the changes were made in alignment with Freddie Mac and in coordination with FHFA. The letter retired the older Limited Review path and widened the project-review waiver to projects of 10 or fewer units.

For you, the practical effect is that larger established projects now generally go through Full Review. Lenders run that review in Fannie Mae’s Condo Project Manager tool and certify the project themselves. Expect more HOA paperwork.

Older web articles still describe Limited Review. Treat them as stale. Rules like these can shift again, so confirm current guidelines with your lender before you make decisions.

Which Condos Skip Project Review Entirely?

Some units avoid the project test. Under Fannie Mae’s general project standards, detached condo units and units in 2 to 10 unit projects get a waiver of project review, though some basic requirements still apply. A condo in a small building may therefore clear the agency test more easily than one in a large tower.

There are limits. The waiver does not cover condo hotels, timeshares, terminating projects, or projects marked “Unavailable.” The 5 to 10 unit waiver does not apply when the project belongs to a master association or larger development. Freddie Mac has its own exempt categories, including 2 to 4 unit condos and detached units.

Do FHA or VA Loans Offer a Way Around It?

Only if the building is on the government’s approved list. FHA and VA loans are government programs, not conventional loans, and each runs its own project approval. A building that fails agency standards may or may not be approved by FHA or VA, so check the building’s status directly.

How Do You Check a Condo Before You Make an Offer?

Ask for the paperwork early. A lender reviewing a condo may gather HOA meeting minutes, financial statements, engineer reports, and the project questionnaire. If the questionnaire does not answer the lender’s eligibility questions, the lender must get more documentation. You can request the same items yourself before you commit.

Use this checklist:

• The current annual budget and the reserve study
• The most recent financial statements
• Meeting minutes for the past year or more
• The insurance certificate for the building
• Any litigation disclosure
• Delinquency data on dues and special assessments
• Owner-occupied versus rented unit counts
• Any engineer or inspection reports, and any planned special assessments
• Whether any short-term rental or hotel-type services operate in the building

Then ask a loan officer to screen the project before you waive contingencies. Across the wholesale programs Lendmire places files with, the building is often the slowest thing to clear, and the earlier it gets reviewed, the more options you keep. Start the HOA document request on day one.

Freddie Mac notes that projects with short-term rentals or hotel-like services may still be eligible. The seller must show the project is not a condo hotel or transient housing. A building with some rental activity is not automatically out.

What If You Are Already Under Contract?

Find out which contingency dates protect you. If the lender flags the project mid-contract, you have a few moves:

1. Ask the lender what failed. The specific reason tells you whether it is curable.

2. Check the contingency window. Your financing contingency may let you exit without losing your deposit.

3. Switch to a lender that finances non-agency projects. Expect different terms.

4. Renegotiate. Higher costs and lower resale liquidity are fair reasons to ask for a better price.

5. Walk away. If the issue is permanent and the alternative financing is a stretch, this is a legitimate answer.

An appraisal does not rescue a failed project. The unit’s value is appraised separately from the project’s eligibility. A good appraisal does not cure a project failure.

A Worked Example

Say you find a one-bedroom unit in a mid-sized building. You have solid credit and plan to put down 5%. Your loan officer screens the project and finds the association is in litigation over a construction dispute. Agency conventional financing is off the table for now. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.

You have three paths. You can wait and see whether the case resolves, though your contract may not allow that. You can look at a portfolio lender, which would likely want a larger down payment and more reserves than the 5% you planned, and the terms would cost more. Or you can walk away and look at a building that passes.

Your decision comes down to two questions. Can you comfortably handle the bigger cash requirement and higher cost? And will you be able to sell this unit, or refinance it, later? A buyer pool limited to cash and specialty loans is smaller. That affects resale.

Is the Status Temporary or Permanent?

It depends on the cause. Resolved litigation, completed repairs, rebuilt reserves, and fewer delinquent owners can all restore eligibility. Excess commercial space, condo-hotel use, and a terminating project rarely change.

The reverse can happen too. A condo that was fine when you bought can lose eligibility later, which raises refinance risk and narrows your future buyer pool. If you finance with a specialty loan now, the plan to refinance into an agency loan later only works if the building cures its problem. Do not count on it.

Does a Big Down Payment Fix the Problem?

No. Down payment size does not change the project’s eligibility, and the CFPB has said a down payment is not itself an indicator of ability to repay. A larger down payment may help you get approved with a specialty lender, since those lenders typically want more cash in, but it does not turn a failed building into a passing one.

What Does the Agency Loan Look Like When the Condo Does Pass?

If your building is warrantable and you are buying a primary residence, you are in familiar territory. Across the conventional programs Lendmire arranges through wholesale lenders in 16 states, leverage runs up to 97% (3% down) on a one-unit principal residence with a fixed rate when at least one borrower is a first-time buyer. Otherwise it is up to 95% (5% down). Second homes go to 90%. The wholesale programs start at a 620 decision score, and the automated finding governs most files, with a total debt ratio ceiling of 50%. All figures are subject to lender guidelines and full file review.

Mortgage insurance is required above 80% loan-to-value. You can request cancellation at 80% of the original value with good payment history, no subordinate liens, and no decline in value. The servicer must terminate it automatically at 78%. That is the mechanical benefit of an agency-style loan, and part of what you give up when a building forces you into a specialty loan.

Loan size matters separately. A loan above the conforming limit is a jumbo loan whether or not the condo is warrantable.

Where Lendmire Fits

If your condo passes, Lendmire arranges conventional loan programs through wholesale lenders, and a loan officer can help screen the project early. If it does not pass, the right move is usually to learn why before you spend on an appraisal or inspection.

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file.

Key Terms Defined

Warrantable condo: A condo project that meets Fannie Mae or Freddie Mac standards, so loans on its units can be sold to the agencies.

Non-warrantable condo: Industry shorthand for a project that fails those standards. The guides call it an ineligible project.

Condo Project Manager (CPM): Fannie Mae’s tool that lenders use to review and certify a condo project.

Non-QM loan: A loan that does not meet one or more Qualified Mortgage requirements. It still requires a check of your ability to repay.

Portfolio loan: A loan the lender keeps on its own books instead of selling to the agencies. The lender sets its own rules.

Special assessment: A one-time charge to owners, usually to fund repairs the budget cannot cover.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage serving homeowners and home buyers in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending channels; Lendmire brokers the financing and the lender underwrites each application. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Selling Guide B4-2.1-03, Ineligible Projects

2. Freddie Mac Guide §5701.3, Ineligible Projects

3. CFPB ATR/QM Small Entity Compliance Guide (April 2021)

4. Freddie Mac Guide §5701.5

5. Fannie Mae Project Standards Requirements FAQ

6. Fannie Mae LL-2026-03 announcement

7. Fannie Mae Selling Guide B4-2.1-01, General Project Standards