By Michael Most
Although Fannie Mae has a strong hold on mortgage guidelines, there are still options available for buildings that do not meet their requirements. These projects are referred to as “Non Warrantable”
Major banks have portfolio products which are used to keep the security of such loans on their balance sheet. When banks have this sort of liquidity on hand, they can make their own rules and circumvent many of the Fannie/Freddie requirements.
If you’re concerned a lender will decline your portfolio, there are several “compensating factors” that can help you get approval. You’re more likely to be approved by a lender if the building you’re buying into meets any or all of the following criteria
- The building has a 10% budget for major repairs
- There’s no pending litigation
- The building maintains less than 30% commercial space
- A single entity does not own more than 10% of the building’s units
You stand a better chance when the building meets three of the four criteria above and only requires an exception for one. That said, there’s no blanket rule and there are often unique exceptions made based on personal factors. Given the unpredictable and unruly nature of the beast, it can be very helpful to contact a mortgage broker to go over the specifics of the your personal finances and the specifics of the building you’re looking to buy into. When seeking a mortgage broker, be sure to ask if he or she has experience with local Non Warrantable projects.