SB 326 Non-Warrantable Condos: Your Mortgage Options in California

The call no California condo buyer wants to get: “Your building failed SB 326 review — the loan is denied.” It’s happening daily across California right now. Conventional lenders are walking away from transactions as SB 326 balcony inspection non-compliance spreads through the state’s condo market. But “non-warrantable” doesn’t mean “unfinalanceable.” It means you need the right lender.

Here’s a complete breakdown of every mortgage option available to California condo buyers when SB 326 is the problem.

First: Understand Exactly What’s Non-Warrantable

Not every SB 326 situation is the same, and the financing options available depend entirely on the specific issue:

• Inspection not yet done: The HOA hasn’t scheduled or completed the required structural inspection. This is the easiest situation — the building is non-compliant through inaction, not findings.
• Inspection done, minor issues, funded: The inspection found problems but the HOA has a funded repair plan. This may still qualify for conventional financing depending on lender interpretation.
• Inspection done, critical deficiencies, unfunded: Structural problems identified, no repair plan. This triggers automatic non-warrantable status with Fannie Mae and Freddie Mac.
• Special assessment levied: HOA has issued a special assessment to fund repairs. Outstanding special assessments make a building non-warrantable until collected or resolved.
• Litigation: Any SB 326-related legal action creates an automatic non-warrantable flag.

The more severe the situation, the narrower the financing options — but options exist across the spectrum.

Option 1: Portfolio Lender Loans

Portfolio lenders are the most versatile solution for SB 326 non-warrantable condos. These lenders keep loans on their own books and apply their own condo review criteria — not Fannie Mae’s or Freddie Mac’s. Many portfolio lenders are specifically experienced with California’s SB 326 landscape and have internal approval processes designed for exactly this situation.

Typical terms:

• Rate premium: 0.50–1.25% above current conventional rates
• Down payment: 20–25% typical, some programs at 15%
• Loan amounts: $100,000–$3,000,000+
• Credit: 680+ minimum, 720+ for best pricing
• Income: Full documentation standard

Portfolio lenders are the best rate option among non-conventional solutions, and for many buyers the rate premium is a worthwhile trade-off to close a deal on the right property at the right price.

Option 2: Non-QM Condo Programs

Non-Qualified Mortgage investors offer specialty condo programs that don’t require Fannie/Freddie warrantability approval. Non-QM programs are more flexible on documentation — bank statement programs, asset depletion, DSCR — and can accommodate a wide range of borrower and property profiles.

Typical terms:

• Rate premium: 1.00–2.00% above conventional depending on borrower profile
• LTV: Up to 80% (20% minimum down)
• Loan amounts: $50,000–$5,000,000
• DTI: Up to 50%
• Credit: 620+ for most programs

Non-QM is particularly valuable for self-employed buyers, investors, and borrowers with complex income situations who are also dealing with an SB 326-affected building.

Option 3: FHA Spot Approval

Here’s one most buyers don’t know about: FHA’s Single Unit Approval (spot approval) process allows individual condo units to receive FHA financing even when the overall building isn’t FHA-approved and even when there are SB 326 issues — provided the specific unit and certain building-level criteria are met.

Why this is powerful:

• 3.5% minimum down payment (with 580+ credit score)
• Allows credit scores as low as 580 (with 10% down at 500+)
• Opens the door for buyers with limited savings in buildings conventional lenders won’t touch
• Doesn’t require the full building to be FHA-approved

FHA spot approval isn’t available in every building and every SB 326 situation — we evaluate eligibility case by case. But when it works, it’s one of the most buyer-friendly solutions available.

Option 4: DSCR Loans for Investors

If you’re purchasing a non-warrantable condo as a rental property, a DSCR (Debt Service Coverage Ratio) loan qualifies you based on the property’s rental income potential rather than your personal income — and without conventional condo warrantability requirements. No HOA approval process needed.

Typical terms:

• DSCR minimum: 1.0–1.25 (rental income covers 100–125% of PITI)
• Down payment: 20–25%
• No personal income documentation required
• Works for short-term (Airbnb/VRBO) and long-term rentals

DSCR loans are popular with investors who want to move quickly and don’t want to document personal income, particularly for higher-priced California condo markets where rental income is strong.

Option 5: Cash-Out Refinance on Your Primary Home

If you own your primary residence with equity, a cash-out refinance can fund an all-cash purchase of a non-warrantable condo — bypassing the condo financing problem entirely. Once you own the condo free and clear, you can later refinance it separately when the building achieves warrantable status.

This strategy works best when you have significant equity in your primary home and the condo purchase price is manageable relative to your home’s value.

How to Move Forward

The critical first step when you’re in an SB 326-affected building: call a lender who knows these programs before you go under contract or cancel your purchase. Many deals that lenders decline can be saved with the right program — but you need that information early.

DiVita Home Finance works with portfolio investors, non-QM lenders, FHA spot approval specialists, and DSCR investors specifically for California SB 326 situations. We serve buyers throughout Palm Springs, San Francisco, Los Angeles, Orange County, Marin County, the East Bay, and all of California.

Call 800-239-1103 today or apply online. Tell us about your building and we’ll identify your best financing path — fast. Also see our complete SB 326 condo mortgage guide for more information.

Related Resources

• SB 326 Non-Warrantable Condo Mortgage Options — Full Guide
• August 2026 Fannie Mae Condo Rule Change
• SB 326 and San Francisco Condo Financing
• Special Assessments & SB 326
• 2026 Conforming Loan Limits California

More SB 326 Resources

• SB 326 Los Angeles Condo Mortgage 2026
• SB 326 Oakland & East Bay Condo Mortgage 2026
• HOA Special Assessment Loan Options California 2026
• Can I Refinance My Condo with SB 326 Pending?
• SB 326 vs SB 721 — What Buyers Need to Know
• SB 326 Approved Lenders California