Why so many Honolulu condos are non-warrantable
Fannie Mae lists the project types it will not buy loans on in Selling Guide section B4-2.1-03, Ineligible Projects. Several of those describe a large share of Oahu buildings:
- Hotel and condotel operation. Buildings with a rental desk, daily cleaning or hotel-style rentals, which covers much of Waikiki.
- Critical repairs and special assessments. Projects that need significant repairs affecting safety or structural soundness. Older high-rises facing spalling, plumbing or fire-safety work often land here.
- Litigation. Pending lawsuits against the association or developer, including construction defect claims.
- Ownership concentration. One person or entity owning too many units in the building.
- Commercial space. Mixed-use buildings with a large share of retail or office space.
Source: Fannie Mae Selling Guide, B4-2.1-03, Ineligible Projects (selling-guide.fanniemae.com). Freddie Mac has similar rules in its Seller/Servicer Guide, Chapter 5701.
What I do differently
A bank checks a building against one set of rules and stops. I check it against the guidelines of the portfolio and non-QM lenders in my network. Each one looks at different things: reserves, the repair plan, how the unit will be used, and your down payment.
- I review the HOA questionnaire and budget before you write an offer.
- I tell you which lenders will consider the building and what they will need.
- I compare their pricing so you are not stuck with the first lender who says yes.
What to expect
- Down payment is usually higher than for a warrantable condo. Plan on 10 to 30 percent depending on the building and use.
- Rates are typically higher than conventional. Shopping many lenders is how you narrow that gap.
- Condotel loans may count rental income, depending on the lender.
Common questions
What is a non-warrantable condo?
A condo in a project that does not meet Fannie Mae or Freddie Mac project eligibility rules. Because the loan cannot be sold to them, most banks will not make it. Portfolio and non-QM lenders can.
Can I get a loan on a Waikiki condotel?
Yes, with lenders that finance condotels. Expect a larger down payment than a standard condo, often 20 to 30 percent, and pricing based on the building and how the unit is used.
My building has a special assessment. Can I still buy?
Often. It depends on what the assessment pays for. Fannie Mae treats projects that need critical repairs affecting safety or structural soundness as ineligible, which is common in older Honolulu high-rises. Other lenders look at the repair plan and reserves instead.
How fast can you tell me if a building is financeable?
Send me the building name and the HOA questionnaire if you have it. I can usually tell you the same day which of my lenders will consider it.