Buying or selling a condo in Detroit and keep hearing “warrantable” or “non‑warrantable”? These labels can make or break your loan options, timeline, and even your price strategy. If you want a smooth closing, it pays to understand what lenders look for and how Detroit’s mix of conversions and mixed‑use buildings can affect eligibility. In this guide, you’ll learn what these terms mean, how they impact financing, and what to check before you write or accept an offer. Let’s dive in.
Warrantable vs. non‑warrantable, in plain English
A condo is “warrantable” when it meets the rules set by Fannie Mae and Freddie Mac. Lenders can sell those loans to the secondary market, which usually means more lenders, lower rates, and lower down payments. You can review the kinds of issues that can make a project ineligible in Fannie Mae’s guidance on ineligible projects.
A condo is “non‑warrantable” if it fails one or more of those standards. Examples include too many investor‑owned units, ongoing developer control, high commercial space, low reserves, or certain types of litigation. Buyers in non‑warrantable buildings often need specialty or portfolio loans that typically carry higher rates and larger down payments, which can shrink the buyer pool.
What makes a condo warrantable
Lenders and agencies update rules over time, but the big items are consistent. Common make‑or‑break factors include:
- Owner‑occupancy ratios that meet agency thresholds. Many programs look for at least half the units to be owner‑occupied. FHA and VA have similar expectations for full approvals. See FHA’s condo guidance on HUD’s site.
- Limited single‑entity ownership. A single owner holding too many units can be a red flag under GSE rules.
- Reasonable commercial space. Mixed‑use is allowed within limits. If non‑residential space is too high, the project can be ineligible.
- Solid HOA finances and reserves. Lenders want clear budgets, financial statements, and ongoing reserve funding. Michigan administrative rules commonly reference a 10 percent reserve funding standard, which aligns with lender expectations, as summarized in this Michigan condo reserve overview.
- Insurance that meets agency standards. Master property insurance must be sufficient and current.
- No critical repairs or disqualifying litigation. Structural issues or association‑level lawsuits can halt agency financing.
- No prohibited use types. Condotels, timeshares, or mandatory club memberships are typical disqualifiers. See more examples in Fannie Mae’s ineligible project list.
Why it matters in Detroit
Detroit’s condo landscape includes adaptive reuse, conversions, and large mixed‑use proposals. During buildout or conversion, a developer may control the board, hold many units, or deliver space in phases. Any of these can trigger extra lender scrutiny. Large projects in and around downtown, including proposals to reshape the Renaissance Center area, highlight why mixed‑use ratios and phased sales matter to lenders, as tracked in this local Detroit development overview.
Price alone does not determine warrantability. Even in popular areas like parts of Corktown and the riverfront, the building’s structure, reserves, insurance, and owner mix decide whether conventional, FHA, or VA loans will work.
How lenders actually check
- Conventional loans. Lenders use Fannie Mae’s tools, including the Condo Status Finder, and Freddie Mac’s Condo Project Advisor. If results show the project is acceptable, conventional financing is usually available. If not, conventional options may be limited.
- FHA loans. The project must be FHA‑approved, or your lender may pursue Single‑Unit Approval when permitted. Review FHA’s program details on HUD’s condominium page.
- VA loans. VA keeps its own condo approval process and list. You can review an overview of VA’s process in this VA condo approval explainer.
If the project is non‑warrantable
You still have options:
- Portfolio or non‑QM loans. These are kept by the lender rather than sold to the GSEs. Expect higher rates and larger down payments, often 20 to 30 percent, as outlined in this overview of non‑warrantable loan options.
- FHA or VA paths. If the building may qualify, FHA Single‑Unit Approval or VA approval can create a path forward, but expect extra documentation and time.
- Fix the issue. Associations can address problems like underfunded reserves, outdated insurance, or certain bylaws. After remediation, the project can be re‑reviewed for eligibility.
Detroit buyer due diligence checklist
Ask for these items early. Your lender will likely request them anyway, and delays here are the most common reason condo loans stall.
- HOA budget and financials for the last 2 to 3 years
- Most recent reserve study and current reserve balance
- Master insurance declaration and certificate with replacement‑cost coverage
- Governing documents: master deed, bylaws, rules, and amendments
- Current owner roster and owner‑occupancy versus rental percentages
- Any special assessments, pending or recent
- Litigation disclosures or attorney letters
- Evidence of developer turnover and presale percentages for new or phased projects
- Proof of completion and permits for conversions and rehabs
- Lender tool checks: ask your lender to run Fannie’s Condo Status Finder and Freddie’s Condo Project Advisor, and to verify FHA or VA status as applicable through HUD’s condo page or VA’s process overview linked above
For a deeper look at how lenders evaluate condo projects, see Fannie Mae’s general project standards.
Smart strategies for Detroit sellers and boards
- Get your documents ready. Clean, current budgets, reserve studies, and master insurance are essential. Quick responses to lender questionnaires can keep a sale on track.
- Fund reserves consistently. Michigan’s administrative rules and common lender expectations align around ongoing reserve funding, which supports eligibility and future maintenance.
- Plan ahead for mixed‑use and conversions. Keep commercial space within agency norms when possible, finish common elements before listing, and complete developer turnover in a timely way.
- Resolve fixable issues. If litigation, insurance gaps, or problematic bylaws are blocking loans, address them with counsel and your management team, then seek re‑review.
Timeline and budgeting tips
- Build in extra time. FHA, VA, or single‑unit approvals can add weeks. Conventional checks are faster but still require documents.
- Budget for HOA costs. HOA dues and any special assessments affect your monthly and closing costs. The CFPB explains how dues interact with your mortgage in this HOA fees guide.
- Keep financing flexible. If a building is flagged as non‑warrantable, you may pivot to a portfolio lender or revisit terms with the seller while the association works on fixes.
Ready to explore Detroit condos with a strategy that fits the building and your budget? Reach out to Five Star Luxury Realty for clear guidance, lender coordination, and contract‑savvy negotiation.
FAQs
What does “warrantable condo” mean in Detroit financing?
- It means the building meets Fannie Mae and Freddie Mac standards, which usually opens the door to more lenders, lower rates, and lower down payments.
How do I check if a Detroit condo is warrantable?
- Ask your lender to run Fannie’s Condo Status Finder and Freddie’s Condo Project Advisor, and verify FHA or VA status if relevant.
Can I use FHA or VA if the project is not already approved?
- FHA may allow Single‑Unit Approval in some cases, and VA has its own approval path, but both add documentation and time; start early using HUD’s FHA condo page and VA’s approval overview.
What makes a Detroit condo non‑warrantable most often?
- Common issues include high investor concentration, too much commercial space, low reserves, developer control, or association‑level litigation, as outlined in Fannie’s ineligible projects list.
If a building is non‑warrantable, can I still buy?
- Yes, but you may need a portfolio or non‑QM loan with a higher rate and down payment, as summarized in this non‑warrantable loan guide.
