How to Finance Non-Warrantable Condos in South Florida

South Florida’s luxury condo market offers some of the most desirable properties in the state, but many high-rise buildings fail to meet Fannie Mae and Freddie Mac warrantability standards. When a condo project falls into non-warrantable status, conventional and conforming lenders will not touch it, leaving buyers scrambling for financing alternatives. Jumbo lenders are not bound by Fannie or Freddie guidelines, but most still avoid non-warrantable condos because the risks mirror those that made conforming lenders reject them in the first place. Understanding why condos lose warrantable status and which portfolio jumbo products can finance them anyway gives you a path forward when traditional jumbo doors close.

What makes a condo non-warrantable

Fannie Mae and Freddie Mac define warrantable condos as those meeting specific project-level criteria including owner-occupancy ratios, budget reserves, litigation status, and completed construction. If fewer than fifty percent of units are owner-occupied, the project is non-warrantable. If the HOA is involved in active litigation beyond minor disputes, it is non-warrantable. If the developer still owns more than ten percent of units, it is non-warrantable. If more than fifteen percent of owners are delinquent on HOA dues, it is non-warrantable. If the building allows short-term rentals or operates as a hotel-condo, it is non-warrantable. Any one of these conditions disqualifies the project from conforming financing, and most conventional jumbo lenders follow similar rules.

Why jumbo lenders avoid non-warrantable condos

Even though jumbo lenders are not required to follow Fannie or Freddie standards, most adopt similar guidelines because the underlying risks are real. Low owner-occupancy suggests the building functions as an investment property rather than a stable residential community, which correlates with higher default rates. Active litigation threatens property values and HOA finances. Developer control raises concerns about unsold inventory and financial viability. High delinquency rates signal HOA budget problems that can lead to special assessments or deferred maintenance. Short-term rental prevalence increases wear and tear and reduces building appeal to long-term residents. Jumbo lenders care about resale value, and non-warrantable condos are harder to sell because future buyers face the same financing obstacles.

Portfolio jumbo lenders fill the gap

A subset of jumbo lenders keep loans in portfolio rather than selling them to investors, which gives them flexibility to approve non-warrantable condos when the borrower’s profile is strong enough to offset project risks. These portfolio lenders typically require higher credit scores—often 740 minimum—larger down payments of thirty to forty percent, and substantial cash reserves post-closing. Interest rates run one to two percent higher than rates on warrantable condos because the lender is pricing in the project risk and the lack of a liquid secondary market. If you have excellent credit, significant assets, and stable income, portfolio jumbo products can finance non-warrantable South Florida condos that traditional jumbo lenders decline.

Specific non-warrantable issues and lender responses

Not all non-warrantable issues carry equal weight. A building with forty-eight percent owner-occupancy might get approved by a portfolio lender willing to accept slightly elevated risk. A building with active litigation over structural defects will get rejected by almost everyone because the lawsuit threatens both property values and habitability. A condo-hotel that allows nightly rentals through Airbnb will struggle to find any lender because the transient nature undermines residential character. If you are considering a non-warrantable condo, understand which specific issue makes it non-warrantable and whether that issue is likely to improve or worsen over time. Lenders make case-by-case decisions based on the nature and severity of the problem.

HOA budgets and reserve studies matter

Portfolio jumbo lenders scrutinize HOA financials even more carefully than they do for warrantable condos because non-warrantable status often signals financial instability. They will review the operating budget, reserve fund balance, and reserve study projections to confirm the HOA can cover routine maintenance and planned capital expenditures without special assessments. If the reserve study shows the building needs a five million dollar roof replacement in three years but the reserve fund holds only one million, lenders will question whether owners will face surprise assessments that strain their ability to pay the mortgage. Strong HOA finances can overcome some non-warrantable issues, while weak finances will kill deals even when other factors look acceptable.

Short-term rental restrictions and lender appetite

Some South Florida condo buildings allow owners to rent units on nightly or weekly bases through platforms like Airbnb and VRBO. These short-term rental allowances automatically make the project non-warrantable under Fannie and Freddie standards, and most jumbo lenders avoid them entirely. The transient occupancy undermines residential stability, increases wear and tear on common areas, and complicates property management. If you want to finance a condo in a building that allows short-term rentals, expect to search longer for a portfolio lender willing to consider it, and be prepared to accept higher rates and down payment requirements. Some lenders will approve these properties only if you sign an agreement not to rent short-term yourself, even though the building allows it.

Developer concentration and unsold inventory

When a developer retains more than ten percent of units in a condo project, it signals that sales velocity was slow or the developer is speculating on future appreciation. Lenders worry that if the developer faces financial pressure, they will flood the market with discounted units, depressing values for all owners. Portfolio jumbo lenders might approve financing in developer-controlled buildings if the developer is financially strong, the project is nearly sold out, and the borrower’s down payment exceeds thirty-five percent. They will not approve if the developer is struggling or if unsold inventory exceeds twenty percent, because the risk of distressed sales is too high.

How to identify non-warrantable status before you shop

Before you make an offer on a South Florida luxury condo, request the HOA documents including the master insurance policy, budget, reserve study, meeting minutes, and bylaws. Ask your real estate agent or attorney to review them for red flags including litigation, low owner-occupancy, short-term rental allowances, delinquency rates, and developer ownership. If the project shows signs of non-warrantable status, contact a portfolio jumbo lender early in your search to confirm they will consider financing it before you waste time and due diligence money on a property you cannot finance. Do not assume that because a building is beautiful and expensive, it will be financeable.

The bottom line for non-warrantable condo buyers

Non-warrantable condos in South Florida are common, especially in high-rise luxury buildings with low owner-occupancy, short-term rental allowances, or developer concentration. Most jumbo lenders avoid them, but portfolio lenders will consider them if your credit, down payment, and reserves are strong enough to offset project risks. Expect higher rates, larger down payments, and extensive HOA financial reviews. Identify non-warrantable issues before you make an offer so you can line up financing early and avoid contract failures. The right portfolio jumbo lender can make these deals work, but you need excellent borrower credentials and realistic expectations about pricing and terms.