When purchasing a condo or co-op, the lender is underwriting both the borrower and the building. The lender must verify the fiscal strength of the building into which you’re buying, and not all developments pass the test. Many buildings do not meet the criteria of the big banks, which can make obtaining a mortgage more challenging. The building may be considered non-warrantable if any of the following exist:
- The project is new construction and/or has yet to be completed
- The developer has not turned over control of the HOA to the owners
- A high percentage of units are non-owner-occupied
- The building allows short-term rentals
- A single person, or entity, owns more than 10% of the total number of units
- The building or developer is involved in litigation
- Commercial space exceeds 25% of the total building square footage
In order to obtain a mortgage on a non-warrantable condo or co-op, you’ll need to speak with a specialty lender such as Bank of England. We will review the building characteristics and give you a quick read on your financing options.