There is sometimes confusion in regard to the difference between an FHA/Hud approved condo complex and a Fannie Mae/Freddie Mac approved complex.
If a borrower wishes to obtain FHA financing to purchase a condo, the entire condo complex must be FHA/HUD approved. If a borrower wishes to obtain conventional financing to purchase a condo, the entire condo complex needs only to be “warrantable.”
Condo complexes do not need to be Fannie Mae/Freddie Mac approved. Warrantable means the condos qualify for Fannie/Freddie financing b/c they meet certain criteria (illuminated in the Condo Questionnaire provided by the HOA).
Warrantable condos, for example: (1) must not be in litigation; (2) must not have a single owner with more than 10% of the units; (3) must not have more than 15% of the unit owners behind with HOA dues; (4) must have the homeowners, not the developer, in control of the HOA; and (5) must be over 50% owner-occupied if an investor is buying the unit. Owner occupancy ratios are irrelevant for owner-occupied buyers.
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