A buyer comes to me pre-approved. They've found a condo they love, the offer is accepted. Then the file hits underwriting and everything stops. The lender comes back with a list of HOA documentation they need. The HOA doesn't respond fast enough. The building has too many investor-owned units. The reserve fund is below the threshold the lender requires. The deal dies, or the buyer has to scramble for a completely different loan structure with a week to go.
This happens constantly in LA. Condos are one of the most common entry points for first-time buyers and investors in this market, and they come with a layer of financing complexity that single-family homes simply don't have. Most buyers don't know this going in. Most advisors don't flag it early enough.
The warrantability problem.
Fannie Mae and Freddie Mac back most conventional loans. For them to purchase your loan, the condo building itself must meet eligibility requirements. A building that qualifies is "warrantable." One that doesn't is "non-warrantable." Most conventional lenders simply won't approve a loan in a non-warrantable building. Here are the most common reasons a condo fails:
Too many investor-owned units. Fannie and Freddie require no single entity to own more than 10% of the units. Common in newer buildings and conversions throughout LA.
Inadequate HOA reserves. Lenders require the HOA to maintain a reserve fund equal to at least 10% of the annual budget. A recurring issue in older Westside and Valley buildings.
Too much commercial space. If a building has more than 35% commercial square footage it's typically non-warrantable. Catches many mixed-use buildings in Downtown, Hollywood, and the Arts District.
Pending litigation. Any active legal action against the HOA makes most conventional lenders walk. Construction defect suits are extremely common in newer buildings and are probably the most frequent deal-killer I see.
Owner-occupancy rate too low. If fewer than 50% of units are owner-occupied, the building is considered investment-heavy and often won't qualify for conventional financing.
I run a condo eligibility check before the offer, not after. If there is a warrantability issue, you know about it before you are under contract, and we already have the alternative financing in place.
The financing solutions that actually work.
Non-warrantable does not mean un-financeable. It means you need a different tool. Here are the four we use most often:
Portfolio lenders hold their loans in-house rather than selling them to Fannie or Freddie. They set their own guidelines and can approve buildings that conventional lenders won't touch. Rates are typically slightly above conforming, but the spread is often smaller than buyers expect.
Jumbo lenders often have more flexibility on condo eligibility than conforming programs. In LA, the jumbo threshold is above $1,089,300 for a single unit. Some lenders who won't approve a conforming condo will approve the same unit at the jumbo level.
For investors buying condos as rentals, DSCR loans qualify on the rental income the property generates rather than the borrower's personal income. DSCR lenders have their own condo eligibility guidelines and can often approve buildings where conventional lenders won't go.
Some buildings that don't qualify for Fannie's full project review can still qualify under a limited review if the loan-to-value is low enough. A 25% or greater down payment unlocks this path in certain situations. When it works, the rate is conventional.
What I do differently.
Before you write an offer on a condo, I pull the HOA questionnaire, check litigation status, verify investor concentration and reserve funding, and run it against eligibility guidelines across conventional, portfolio, and jumbo programs. This happens before you are under contract, not after.
The condo market in LA is deep and competitive. There are buildings in almost every neighborhood worth owning, and most financing challenges are solvable if you know they are coming. The buyers who get stuck are the ones who find out too late.
Tell me the building and I will run an eligibility check before you make the offer. If there is a financing issue, we will know before it costs you the deal.
Get a condo eligibility check, freeA condo financing problem is solvable. Finding out too late is not.
If we're a good fit, you'll know in 15 minutes. If we're not, I'll tell you that too.
Get a condo eligibility check, free