Found a condo you love, then your lender said the building is non-warrantable? You are not alone in Seattle’s condo market. Many great buildings in Downtown, Belltown, Capitol Hill, Queen Anne, Ballard, and Magnolia can fall outside standard loan programs because of project-level factors. In this guide, you’ll learn what non-warrantable means, why it matters here, and the realistic financing paths that can still get you to closing. Let’s dive in.
What non-warrantable means in Seattle
A condo is “warrantable” when the project meets major investor rules from Fannie Mae or Freddie Mac. If it doesn’t, the project is considered “non-warrantable,” which limits access to standard conforming loans and can increase costs. Government programs like FHA and VA also have their own condo approval processes, which are separate from Fannie and Freddie.
In the Seattle-Bellevue-Everett area, non-warrantability shows up more often due to mixed-use buildings, higher investor ownership in urban cores, short-term rental rules, and periodic construction-defect litigation. Washington’s Condominium Act (RCW 64.34) sets out how condos are formed and governed, and local litigation or repair issues can push a project offside for many lenders.
Common reasons projects are non-warrantable
Lenders look at the stability of the entire project, not just your unit. Key triggers include:
- Pending or recent litigation that involves the HOA or developer, especially construction-defect or major repair claims.
- High delinquency on HOA dues or weak HOA financials that suggest unstable cash flow.
- Low or no reserve funds, or an inadequate reserve study for anticipated repairs.
- High investor concentration and low owner-occupancy.
- Excessive commercial space or unusual mixed-use factors that affect residential stability.
- Active short-term rental rules or high short-term rental activity.
- Incomplete or recently converted projects without enough closed units or required documentation.
- Single-entity or concentrated ownership of many units.
- Project documents that don’t meet investor tests, including inadequate insurance.
- Large special assessments or unfunded capital projects.
A project that is not eligible for Fannie or Freddie might still work for FHA or VA in certain cases, or with a lender that keeps loans in-house.
Your financing options
Even if the project is non-warrantable, you still have choices. The right route depends on your credit, down payment, timeline, and the specifics of the HOA.
Portfolio loans
Portfolio lenders keep loans on their own books and can set flexible rules.
- Pros: Flexible on HOA issues, occupancy, litigation, and reserves. Often the most practical path for unique projects.
- Cons: Usually higher rates and fees than conforming loans. Terms vary by lender.
- What to expect: Strong credit, larger down payment, and proof of reserves. Lenders may ask for more documentation on HOA health and potential assessments.
Non-conforming or condo specialty loans
Some lenders offer products designed for non-warrantable condos.
- Pros: Tailored guidelines for these scenarios.
- Cons: Higher rates and costs than standard conforming loans. Underwriting overlays differ by lender.
FHA and VA pathways
FHA and VA have their own condo approval systems, including single-unit approvals in some cases.
- Pros: Potentially lower down payment and more flexible credit if the project or unit qualifies.
- Cons: Extra paperwork and time. Not all lenders process single-unit approvals, and projects still must meet FHA or VA standards.
Jumbo loans
If your loan amount is over the conforming limit, some jumbo lenders offer more flexible project reviews.
- Pros: Credit strength can carry more weight even when the project is complex.
- Cons: Higher down payments and reserves are common, and pricing can be higher than conforming.
Bridge or hard-money loans
Short-term funds help you close now and refinance later.
- Pros: Fast decisions and flexible terms.
- Cons: High rates, high fees, and short maturities. Best used as a temporary solution.
Seller financing or a co-signer
Creative routes when traditional financing is tight.
- Pros: Can solve for project-level hurdles when both sides agree to terms.
- Cons: Depends on seller willingness and legal considerations. Less common for larger purchases.
Combine strategies
Some buyers close with a bridge or private loan, then refinance into a portfolio or conventional loan after litigation resolves, repairs finish, or the project meets investor rules again.
What lenders will review
Plan for deeper project-level underwriting. Typical requests include:
- HOA budget and financials, including income and expense statements.
- Recent HOA meeting minutes, usually 12 to 24 months.
- Reserve study and current reserve balance.
- CC&Rs, bylaws, and the insurance master policy.
- Evidence of adequate master insurance, including limits and deductibles.
- Litigation disclosures, counsel letters, and details on scope and exposure.
- Owner-occupancy and investor concentration figures.
- HOA dues delinquency rate and collection history.
- Percentage of commercial space and any ground lease details.
- Confirmation that the project is not an ineligible type like a hotel-condo or timeshare.
- Appraisal with comparable sales and project condition notes.
Lenders also use standardized condo questionnaires to gather details. Incomplete or unclear answers can delay or block approval, so request the full HOA packet early.
Smart buyer strategies in Seattle
A proactive plan can keep your deal alive and reduce stress.
- Start financing early. Pre-approval means less without a project review. Engage your lender as soon as you identify a building.
- Request the full HOA packet right away. Ask for financials, reserve study, minutes, insurance declarations, and any engineering reports.
- Build time into contingencies. You may need longer financing or inspection windows for underwriting and any single-unit approval steps.
- Negotiate for credits. If the HOA has a known assessment or repair plan, ask for price reductions or seller credits to offset costs.
- Protect your earnest money. Use contingencies and avoid short timelines unless you have a reliable backup plan.
- Check appraisal depth. If comps are thin in a small or unique building, plan for a stronger down payment.
- Consult an attorney when litigation is involved. Lender acceptance often depends on legal analysis of risk and exposure.
- Consider timing. If repairs or litigation are near resolution, a short-term loan with a clear refinance plan may make sense.
Costs and expectations
Non-warrantable financing usually costs more than a standard conforming loan. Expect:
- Larger down payments, commonly in the 10 to 25 percent range or more depending on credit and lender.
- Higher interest rates compared with conforming loans, with pricing that varies by lender and changes often.
- Higher fees, including origination and additional documentation costs.
Because pricing shifts quickly, check current terms with your lender when you are ready to write an offer. The biggest cost you can control is time. Getting the HOA documents early and aligning your financing path before you negotiate can save you money at closing.
Deal-killers to watch
Some situations make financing very difficult until resolved:
- Active construction-defect litigation that could trigger multi-million-dollar repairs.
- Lapses in master insurance or coverage that leaves unit owners exposed to large losses.
- Unfunded special assessments without a clear payment plan.
- Project types that investors exclude, like hotel-condos or timeshares.
- Projects with very high commercial share or a single owner with outsized control of units.
- Missing or restrictive CC&Rs that conflict with standard mortgage terms.
How to move forward with confidence
Buying in a non-warrantable building is possible when you have a clear process, the right documents, and a loan strategy that fits the project. Focus on three steps: confirm the project status early, match it with the right financing track, and negotiate terms that reflect the real costs and timelines.
If you want a step-by-step plan tailored to Seattle’s condo market, connect with Zac Lee for consultative representation grounded in neighborhood expertise and a proven process.
FAQs
What does non-warrantable mean for a Seattle condo?
- It means the condo project does not meet Fannie Mae or Freddie Mac eligibility rules, which limits conforming loan options and often raises costs and documentation.
Can I use FHA or VA for a non-warrantable condo?
- FHA and VA have separate approval processes, including single-unit approvals in some cases, but the project and unit still must meet those programs’ standards.
Why are downtown Seattle condos often flagged?
- Mixed-use designs, higher investor ownership, short-term rentals, and occasional construction-defect litigation make some urban projects ineligible for standard programs.
What documents will my lender request from the HOA?
- Expect the budget, reserve study, insurance declarations, recent meeting minutes, litigation disclosures, occupancy data, and the standard condo questionnaire.
How much down payment is typical for non-warrantable loans?
- Many portfolio or specialty lenders ask for 10 to 25 percent or more, depending on credit strength and project risk.
Are bridge loans a good idea for these purchases?
- They can help you close when long-term financing is not ready, but they are short-term with higher rates and should include a clear refinance plan.
Can I negotiate price or credits because the project is non-warrantable?
- Yes, buyers commonly request credits or price reductions for known assessments or added financing costs, especially when documentation reveals project risks.
