I’ve recently discussed the different types of condos available, as well as what it means for a condo community to be considered warrantable. But a popular follow up question I am receiving on these topics relates to the “how” of financing – especially in relation to non-warrantable communities.

Financing a unit in a warrantable community is easy: find out which organization approved the community (VA, FHA, Fannie Mae), and then apply through traditional methods. A qualified mortgage broker can help you through the few extra papers which need to be filled out, but it is a relatively easy process.

A non-warrantable community, on the other hand, requires a mortgage specialist who understands the complexities of condo financing and has access to a lender that will work with these properties. In general, a lender will look at the same information that was reviewed to determine if the complex is warrantable. The key difference is there is more flexibility around the requirements, and a human underwriter makes the final decision.

First, you need to consider your credit. In general, there is going to be a minimum cut off of a 660 FICO to qualify. Next, you need to consider your down payment – the biggest disadvantage of purchasing a condo that is not warrantable is that it can only be financed with at least 20% down. there is also a strict 30% limit on the percentage of homes which can be over 30 days past due on HOA dues, and you will generally not have the option to purchase with a fixed-rate loan. And while these sound like pretty tough challenges, they are relatively small hurdles to jump through if the home of your dreams happens to be in a non-warrantable community.

If you are looking to buy a condo and need some guidance through the process, please contact me and I will help you through it. If you have anything to add about financing condos in Michigan, please leave a comment.