What Is a Non-Warrantable Condo? Can You Still Get a Mortgage in California?

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. Non-warrantable condo calls come in almost every week — SB 326 has created a huge pool of buildings that banks won’t touch, but portfolio lenders and FHA spot approval often can. Call (800) 239-1103.

A non-warrantable condo is any condo that doesn’t meet Fannie Mae’s or Freddie Mac’s approval requirements — meaning conventional lenders can’t sell the loan on the secondary market and simply decline to make it. That’s where most buyers get stuck. They hear “non-warrantable” and assume it means the deal is dead. It usually isn’t.

What Makes a Condo Non-Warrantable?

Fannie Mae and Freddie Mac have a checklist for condo project eligibility. Fail one item and the project is non-warrantable. The most common triggers in California right now:

• SB 326 non-compliance: California’s balcony inspection law. If the HOA hasn’t completed required structural inspections, or if inspections found critical deficiencies without a funded repair plan, Fannie Mae flags the building. This is the most common reason I’m seeing non-warrantable condo calls in 2026.
• High investor concentration: If more than 35% of units are non-owner-occupied (rentals), the project fails conventional guidelines.
• Hotel/condo arrangements: Buildings with mandatory rental pools, front desk services, or shared amenities managed like a hotel are typically non-warrantable.
• Litigation: Any pending lawsuit involving the HOA — even if it seems minor — creates a non-warrantable flag.
• Delinquent HOA dues: If more than 15% of units are 60+ days delinquent on HOA dues, the project fails.
• Single-entity ownership: If one entity owns more than 20% of the units in a project (in projects over 20 units), it’s non-warrantable.
• Special assessments: Outstanding unpaid special assessments often trigger non-warrantable status.

What Are the Mortgage Options on a Non-Warrantable Condo?

Portfolio Lender Loans

Portfolio lenders keep loans on their own books instead of selling them to Fannie/Freddie. They write their own condo approval guidelines. Many have streamlined internal review processes specifically for SB 326 situations and non-warrantable buildings.

In mid-2026, with conforming rates at 6.66%, portfolio rates on non-warrantable condos typically run 7.17–7.91% — a 0.50–1.25% premium. On a $650,000 loan, the difference between 6.66% and 7.50% is about $358/month. That’s real money, but it’s the cost of buying in the building you want versus walking away from it.

FHA Single Unit Approval (Spot Approval)

This is the option most buyers don’t know exists. FHA allows individual units to be approved for financing even when the overall building isn’t FHA-approved — and even when there are SB 326 issues — as long as specific criteria are met at the unit level.

When FHA spot approval works, you get near-conventional rates (currently around 6.75–7.00%) with as little as 3.5% down. It’s not available for every building or every SB 326 situation — I evaluate each case individually — but when it applies it’s often the best option available.

Non-QM Condo Programs

Non-Qualified Mortgage investors offer specialty programs that bypass Fannie/Freddie warrantability entirely. They’re particularly useful for self-employed buyers, investors, or anyone with complex income who is also dealing with a non-warrantable building.

Non-QM rates in the current market: approximately 7.66–8.66% depending on your credit profile and documentation. Higher than portfolio, but flexible on income documentation and property eligibility.

DSCR Loans (for Investors)

If you’re buying as an investment or rental property, a DSCR loan qualifies you based on the property’s rental income rather than your personal income. No warrantability review required. Down payment is typically 20–25%. Popular with investors buying non-warrantable condos in San Francisco, Oakland, and LA where rental income is strong.

Cash-Out Refinance on Another Property

If you have equity in your primary home, you can cash-out refinance to fund an all-cash purchase of the non-warrantable condo. Once you own it free and clear, you can later refinance it directly when the building’s warrantable status is resolved. I’ve done this for Marin clients buying condos in San Francisco buildings with pending SB 326 issues.

The Most Important Step: Call Before You’re Under Contract

The worst version of this situation is going into contract, burning two weeks with a conventional lender who eventually says no, and then scrambling to find an alternative — usually at a higher rate than you would have gotten had you done this research first.

When you identify a condo you want to buy, tell me the building address. I’ll run a quick check on the building’s warrantable status, identify which programs apply, and give you a realistic rate picture before you make an offer. That way you’re negotiating with full information, not finding out about problems at the last minute.

Current Market Context

SB 326 has created a large pool of non-warrantable California condos. In markets like San Francisco, Oakland, Los Angeles, and San Diego, a significant percentage of condo buildings are now non-warrantable or on conventional lenders’ ineligible lists. That creates a real buyer opportunity — non-warrantable condos often trade at a discount to comparable warrantable units, sometimes 5–10% below market. Buyers who understand their financing options can negotiate better prices and still close.

Frequently Asked Questions — Non-Warrantable Condo Financing in California

---

Related Resources from DiVita Home Finance

• Condo Loans in California — Warrantable & Non-Warrantable
• Jumbo Loans in California — Rates, Limits & Lenders
• SB 326 Condo Financing — How It Affects Your Mortgage
• San Francisco Mortgage Broker