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. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.
A non-warrantable condo is a unit in a project that doesn’t meet Fannie Mae’s or Freddie Mac’s project eligibility rules, so a lender can’t sell the loan to them. Most banks stop there and decline the loan. That’s where I start. “Non-warrantable” doesn’t mean “unfinanceable” — it means you need a lender that sets its own building rules, and a broker who knows which lender accepts which problem.
This guide covers why California condos go non-warrantable, how the 2026 agency rule changes affect that, and every financing path I use when the building is the problem.
What Makes a Condo Non-Warrantable?
Warrantability is about the project, not you. Your credit and income can be perfect and the loan still gets declined because of the HOA. These are the most common reasons under Fannie Mae’s current Selling Guide:
| Issue | Fannie Mae rule (2026) | Where I see it in California |
|---|---|---|
| Critical repairs / deferred maintenance | Ineligible until repairs are completed — includes unfunded repairs over $10,000 per unit due within 12 months, water intrusion or mold, and advanced deterioration | Older buildings with SB 326 balcony and walkway findings |
| Special assessment for a critical repair | Lender must document every assessment; one tied to an unremediated critical repair makes the project ineligible | Statewide, especially 1970s–1990s wood-frame buildings |
| Litigation | Ineligible if the HOA or developer is a party to pending litigation about safety, structural soundness, habitability or functional use; minor litigation is allowed | Construction defect suits, SB 326 repair disputes |
| Commercial space | No more than 35% of the project or building can be commercial or mixed-use space | Mixed-use buildings in SF, Oakland, LA, San Diego |
| Single-entity ownership | One entity can own no more than 2 units in a 5–20 unit project, or 20% of units in a project with 21 or more | Smaller buildings bought up by investors |
| HOA delinquencies | No more than 15% of units can be 60+ days delinquent on HOA dues | Buildings under financial stress |
| Reserves | Budget must allocate at least 10% of assessment income to reserves (15% for Full Reviews starting January 4, 2027), or a reserve study must support the funding | Older HOAs that have kept dues low |
| Master insurance | Required coverage must be in place; master policy deductible capped at $50,000 per unit starting July 1, 2026 | HOAs that raised deductibles to control premiums |
| Condo-hotel characteristics | Hotel licensing, mandatory rental pools, front desk or daily housekeeping, hotel management; red flags include units under 400 sq ft or without full kitchens | Palm Springs, Tahoe, coastal resort markets — see condotel mortgages |
| New or incomplete projects | New projects must meet presale and completion requirements (generally at least 50% of units sold for primary and second-home loans) | New developments and phased projects |
One Old Trigger Went Away in 2026: Investor Concentration
For years, a building where too many units were rentals was automatically non-warrantable. Fannie Mae retired the investor concentration limit for established projects in 2026 (Lender Letter LL-2026-03). If a lender told you a building failed only because of its rental ratio, it’s worth a second look — though some portfolio lenders still apply their own occupancy rules.
And One Shortcut Went Away: Limited Review
For applications dated on or after August 3, 2026, Fannie Mae’s Limited Review (and Freddie Mac’s Streamlined Review) no longer exist. Most condo projects of 11 or more units now get a Full Review, which surfaces reserve, repair and insurance problems that used to slip through. Small projects — 2–4 units, or 5–10 units not in a master association — can still use a Waiver of Project Review. More in Fannie Mae’s August 2026 condo rule change.
SB 326: California’s Biggest Non-Warrantable Driver
California Civil Code §5551 (SB 326) required HOAs in buildings with three or more attached units to have a licensed structural or civil engineer or architect inspect wood-supported balconies, decks, walkways and stairways more than six feet above ground by January 1, 2025, then every nine years. The inspection itself doesn’t make a building non-warrantable. What matters is what it finds:
- Inspection done, no significant findings — usually no financing issue.
- Minor findings with repairs funded and scheduled — often acceptable, depending on how the HOA documents it.
- Structural deficiencies not yet repaired — typically a “critical repair,” which makes the project ineligible for Fannie Mae until the work is done.
- Inspection never done — the HOA is out of compliance with state law, and many lenders will ask questions the HOA can’t answer well.
Full detail in my SB 326 condo mortgage guide.
HOA Litigation: Which Lawsuits Matter
Litigation is one of the most misunderstood triggers. Under Fannie Mae’s rules, what matters is what the lawsuit is about:
- Usually disqualifying: construction defect suits and other litigation about the safety, structural soundness, habitability or functional use of the project.
- Usually acceptable: non-monetary disputes (neighbor disputes, rights-of-way), claims the HOA’s insurer has agreed to defend, suits where expected damages are no more than 10% of the project’s funded reserves, and localized damage to a single unit that doesn’t affect the project’s overall safety.
Lenders learn about litigation from the HOA questionnaire. Ask your agent for recent board minutes early — lawsuits are usually discussed there first. When litigation does disqualify the building, some portfolio lenders will still lend if the suit isn’t structural, reserves are healthy and the down payment is larger.
New Construction Condos
New projects have no operating history, so the agencies add presale and completion requirements. Before you sign with a developer, ask whether the project has (or has applied for) Fannie Mae, FHA or VA approval, what percentage of units are sold, and whether your phase is complete. If the project isn’t there yet, a portfolio or non-QM loan can close now with a plan to refinance later. Compare the builder’s preferred lender with an outside quote — builder incentives can be real value, but read whether they require you to use that lender.
Non-Warrantable Condo Loan Options
| Loan type | Works on a non-warrantable condo? | Notes |
|---|---|---|
| Conventional (Fannie Mae / Freddie Mac) | No | Project must meet agency eligibility |
| FHA | Sometimes | Needs FHA project approval, or single-unit approval if the project meets HUD’s criteria |
| VA | Sometimes | Project must be VA-approved; the lender can request a review |
| Portfolio non-warrantable condo loan | Yes | Lender sets its own building rules; usually the best-priced option when the agencies say no |
| Non-QM | Yes | Flexible on both building and income documentation |
| DSCR (investors) | Yes | Qualifies on rent instead of personal income |
| Bridge / hard money | Yes | Short-term, while a building issue is being resolved |
Portfolio Non-Warrantable Loans
Banks and specialty lenders that keep the loan on their own books write their own condo guidelines. They’ll often accept litigation that isn’t structural, commercial space above 35%, single-entity concentration, or a building with repairs funded and underway. Expect a higher rate than conforming and a larger down payment — 20–25% is common, and a few programs go lower for strong borrowers. Pricing depends on the specific building issue, so I submit to several lenders to compare.
Non-QM Condo Programs
Non-QM lenders combine building flexibility with income flexibility: bank statement, asset-based, or other self-employed documentation. This fits business owners and investors who have both a complex file and a complex building. Rates are typically higher than portfolio loans.
FHA Single-Unit Approval
If the project isn’t FHA-approved, HUD allows single-unit approval in some projects that meet its requirements. FHA-insured loans through single-unit approval are limited to 10% of the units in the project (no more than two in a project with fewer than 10 units). It won’t work in a building with unresolved structural issues, but when it does work it allows FHA’s low down payment.
DSCR Loans for Investors
Buying the condo as a rental? A DSCR loan qualifies on the property’s rent rather than your tax returns, and many DSCR lenders accept non-warrantable projects.
Use Equity in Another Property
If you own a home with equity, a HELOC or cash-out refinance on that property can fund a cash purchase of the condo. Once the building’s issue is resolved, you can put a conventional loan on the condo and pay the equity line down.
How I Check a Building Before You Write an Offer
- Send me the address and HOA name. I check whether the project shows up in agency or lender approval lists.
- Get the HOA questionnaire, budget, reserve study, master insurance declarations, SB 326 report and recent board minutes.
- I identify the specific issue — reserves, repairs, litigation, insurance, commercial space — and which lenders accept it.
- You get real pricing on the best option before you remove contingencies, not after two weeks with a bank that can’t close it.
Frequently Asked Questions
What does non-warrantable condo mean?
It means the condo project doesn’t meet Fannie Mae or Freddie Mac eligibility rules, so the loan can’t be sold to them. Common causes are unfinished critical repairs, structural litigation, too much commercial space, single-entity ownership, high HOA delinquencies, inadequate reserves or insurance, and condo-hotel characteristics.
Can I get a mortgage on a non-warrantable condo in California?
Yes. Portfolio non-warrantable condo loans, non-QM programs, DSCR loans for investors, and sometimes FHA single-unit approval can all work. The right option depends on the specific building issue and your own profile.
How much down payment does a non-warrantable condo need?
Most portfolio lenders ask for 20–25% down, and some go lower for strong borrowers. Low down payment options like 3–5% conventional are not available on non-warrantable projects; FHA’s 3.5% is only possible if the project or unit gets FHA approval.
Are rates higher on non-warrantable condo loans?
Usually, yes. Because the lender keeps the risk, rates are typically higher than a comparable conforming loan. The premium varies by lender, loan size, down payment and the reason the building is non-warrantable, so comparing several lenders matters.
Does a high number of rentals still make a condo non-warrantable?
Not under Fannie Mae’s current rules for established projects: the investor concentration limit was retired in 2026. Condo-hotel characteristics and single-entity ownership limits still apply.
How do I find out if a condo is warrantable?
Your lender orders the HOA questionnaire and reviews the budget, insurance and other project documents. Do this early, before you remove contingencies, so there’s time to switch to a non-warrantable lender if needed.
Related Resources
- SB 326 Condo Mortgage Guide
- Fannie Mae’s August 2026 Condo Rule Change
- HOA Special Assessment Loan Options
- Condotel Mortgages in California
- SB 721 vs SB 326
- Non-QM Mortgages in California
- DSCR Loans in California
- San Francisco Mortgage Broker
Official Sources & References
Talk to Michael Directly
DiVita Home Finance | Tiburon, CA | In lending since 2000, founded DiVita Home Finance in 2007. Michael DiVita DRE #01372066 | NMLS #241655. Company DRE #01818285 | NMLS #323700.
💬 Text: (310) 849-9124
