Another Non-Warrantable Condo

I’m getting tired of the non-warrantable condo situation, but we’re here again. 

Let’s talk about another condo project that may now have issues. I haven’t confirmed this yet, but I’ve heard from a non-client and an agent that Madison Townhomes at Town Center may now be dealing with underinsurance, litigation, and deferred maintenance. 

Yep, the trifecta. 

If that is true, then we already know what that means: we are likely looking at a minimum of 10% down. But more importantly, it scared away a buyer who was already in escrow and had a good rate locked in. 

Madison has had litigation issues in the past, and historically, we were still able to get loans done there through one of our investors with conventional-style rates. It may no longer be doable, at least not the same way. That does not mean there are no options, but it does mean the financing conversation changes. 

The part that gets me is that this buyer was already renting in the same building. His rent was apparently about the same as what his mortgage payment would have been. But once the condo went from warrantable to non-warrantable, the interest rate changed, project issues came to light, and the whole thing became so scary that he walked. 

And I get it. 

It is scary. Buyers want things to feel perfect. They want certainty. But condo financing does not always work that way. 

In this case, the non-warrantable issue likely could have gotten him a meaningful seller credit. Maybe $10,000. He wanted $80,000, and now the deal is dead. 

The bigger lesson here is that when we are showing condos, we need to be better about explaining the risk upfront. Any condo project can lose Insurance, get hit with litigation, or be flagged for deferred maintenance at any point. A condo that is warrantable today can become non-warrantable tomorrow. 

You might find out while you are in escrow. You might find out a few days after closing. There are no guarantees. 

And here is the funny part: sometimes a non-warrantable condo may actually be the safer bet from a financing-risk standpoint. If it is already non-warrantable, it cannot really fall to a lower category. The only direction it can go is from non-warrantable back to warrantable. 

Now, while we are on the subject, let’s talk about a question I get all the time: 

"But the complex is FHA or VA approved. Doesn’t that mean we are good?" 

Not necessarily.

If the issue is insurance-related, then in theory, you should not be able to do FHA or VA if the master Insurance policy does not meet requirements. But underwriters are human. Mistakes happen. Sometimes someone does not catch something. Sometimes, the master Insurance policy is not reviewed as closely as it should be. 

But hoping someone misses something is not a great business plan. 

When it comes to construction-related issues, like balconies, the situation can be a little different. You may have a better chance of getting those through underwriting unless the appraiser goes out and sees obvious red flags, like tarps on roofs, active balcony repairs, or visible construction defects. 

I’m not comfortable taking risks on these deals, but I’ll proceed if everyone understands the risks and consequences upfront. 

The bottom line is this:

A condo being warrantable today does not guarantee it will stay warrantable tomorrow. A condo being FHA or VA approved does not mean every loan will sail through. And a non-warrantable condo does not always mean the deal is impossible. 

It just means everyone needs to know what they are walking into. 

That is it for non-warrantable condos this week. As always, let us know if you have any questions. 

Interest Rates

Today looks a lot like yesterday, with rates continuing to move higher and many areas of the rate market sitting near 6-month highs.

This roller coaster has been climbing for almost a month now, and at some point, it feels like it has to run off the track. Inflation came in fairly tame today, and there is still plenty of talk about future rate cuts, but right now, there just has not been enough momentum to push rates meaningfully lower.

A big part of the pressure continues to come from uncertainty, including the war and higher gas prices. Until we see some relief there, it may be tough for rates to make a strong move downward.

That said, markets can change quickly, and we are definitely hoping this week starts turning in our favor.

Here’s to a better week ahead! 

Loan Programs Snapshot

• Government loans (FHA/VA/USDA): in the 5s
• Conventional (≤ $832,750): high 5’s / low 6s
• High-balance: mid 6s
• Jumbo: Low to Mid6s
• Bridge Loans 7.75-7.99

Additional options:

• Bank statement loans (10% down+)
• P&L loans (20% down, no bank statements)
• 0% down options (620+ score)
• DSCR loans (15% down)
• Bridge loans (~7.99%)
• Buydowns (3/2/1, 2/1, 1/0)
• Private Money loans – Hard Money  
• Construction Loans
• 203K loans
• Fix and Flip Loans  

Rates subject to change without notice.

Condo Update

• Good news: None today
• Bad news: Madison at Town center  –  Litigation - Deferred maintenance - Insurance   

We love your Non-Warrantable Condo loans!!

Need help checking a condo? Call me, and we can look it up in real time. 

Also:

Full California "naughty list" available here:

https://mikemeena.com/non-warrantable-condos/

Let's Connect 

If you - or your clients, friends, or family - need guidance, I'm here.

📞 661-291-2222 (Direct)

📞 661-714-6258 (Cell)

📞 661-260-2970 ext. 2222 (Office)

📧 Mike@AugustaFinancial.com

Sincerely,