Buying a condo on Florida’s Emerald Coast can look perfect on paper. You find a beachfront unit, your credit and income are solid – but then the lender balks, saying the building doesn’t qualify. The issue in many cases isn’t you. It’s warrantability.
What “warrantable” means
Conventional lenders (following Fannie Mae and Freddie Mac guidelines) require condo buildings to meet certain standards before they’ll finance a unit: enough owner-occupancy versus rentals, adequate reserves, no single entity owning too many units, and no active major litigation against the HOA, among other things. Many resort-style and short-term-rental-heavy buildings along the coast don’t meet these standards, making them “non-warrantable.”
Your financing options
A non-warrantable condo isn’t unfinanceable – it just requires a different lender. Portfolio lenders and non-QM lenders regularly finance these buildings, typically with a larger down payment (often 20-25%) and a somewhat higher rate than a conventional loan.
Know before you fall in love
Ask your agent to check a building’s warrantability status before you write an offer, or at minimum build a financing contingency into your contract. It can save you from a financing surprise late in the process.
Shopping for a condo along the coast? Call Dockside Realty at 850.225.9785 or email christine@docksiderealtyinc.com and we’ll help you understand what you’re buying into.