Why Are Some Condos Hard to Finance in Washington?

Buying a condominium in Washington can sometimes be more complicated than buying a single-family home because lenders evaluate both the buyer and the condominium association before approving a loan.

If a condo does not meet certain lending guidelines, the building may be considered non-warrantable, which means some lenders will not finance it. This can make the property harder to sell and may limit the number of buyers who can purchase the unit.

Understanding why this happens helps buyers avoid surprises when shopping for condos in Seattle and across Washington.

What Makes a Condo “Warrantable”

A warrantable condo is a condominium that meets lending guidelines set by mortgage investors such as Fannie Mae and Freddie Mac.

When a condo is warrantable, lenders are usually comfortable approving conventional mortgage loans for buyers in that building.

Lenders evaluate factors such as:

• the financial health of the homeowners association (HOA)
• the percentage of units owned by investors
• whether there are lawsuits involving the association
• the amount of money held in HOA reserves
• the percentage of units that are owner occupied

If the building meets these standards, it is generally easier for buyers to obtain financing.

What Makes a Condo Non-Warrantable

Some condos are classified as non-warrantable because they fail to meet one or more lending requirements.

Common reasons include:

• too many units rented instead of owner occupied
• inadequate HOA reserve funds
• pending litigation involving the association
• high delinquency rates on HOA dues
• commercial space in the building exceeding lender limits

When this happens, many conventional lenders may decline to finance the property.

How Financing Limits Affect Buyers

If a condo is non-warrantable, buyers may have fewer loan options.

Possible financing situations include:

• higher down payment requirements
• limited lender availability
• higher interest rates
• portfolio loans from specialty lenders

Because of these restrictions, non-warrantable condos sometimes attract fewer buyers and can take longer to sell.

Why Condo Documents Matter

During a condo purchase in Washington, buyers typically receive a large package of HOA documents to review.

These documents may include:

• the resale certificate
• HOA financial statements
• reserve studies
• meeting minutes
• rules and regulations

Reviewing these documents helps buyers and lenders determine whether the building meets financing requirements.

Bottom Line

Some condos in Washington are difficult to finance because lenders evaluate the financial health and ownership structure of the entire condominium association. If the building does not meet lending guidelines, it may be classified as non-warrantable, limiting the loan options available to buyers.