Why a condo fails warrantability, and what to do about it

On a condo, conventional underwriting reviews the project as well as the buyer. The homeowners association completes a questionnaire, and the answers are checked against agency requirements. Fail any one of them and the loan can’t be sold to Fannie or Freddie, so the lender declines, regardless of how strong you are.

This is why the decline feels so arbitrary. It usually has nothing to do with you.

This one deserves separating out. For Fannie and Freddie, litigation is close to a bright-line rule, so the word alone triggers a decline. A portfolio lender can evaluate what the suit actually is: the claim type, the dollar amount, and whether the association has insurance or reserves behind it. A settled slip-and-fall is a different risk than an active structural-defect claim against the developer.

That distinction is often the whole difference between a dead file and a workable one.

Portfolio and non-QM lenders keep these loans rather than selling them to an agency, so they underwrite the building’s actual risk instead of running a checklist. The building type doesn’t disqualify you; it puts the file in a different lane, priced and structured accordingly.

Occupancy still decides the licensing question: owner-occupied is a consumer loan in licensed states only, while an investor-titled purchase is business-purpose and available in any state.