Warrantable vs. Non-Warrantable Condos And Your Mortgage Rate

When people start shopping for the perfect condo, they’re usually thinking about location, layout, amenities, or view—not whether the building qualifies as warrantable or non-warrantable. But that distinction can have a massive impact on your financing. If a condo isn’t considered warrantable, it may not qualify for a conventional mortgage—and that means fewer options, stricter terms, and higher costs. Knowing the difference upfront can save you time, money, and a whole lot of frustration.

Buying a condo can feel like the perfect middle ground—less upkeep than a house, more ownership than renting. But just like neighborhoods, no two condos are exactly alike. Some buildings offer rooftop pools, concierge service, and short-term rental flexibility, while others are simpler and cater to long-term, owner-occupied residents. These differences don't just shape your lifestyle—they can shape your loan. Before you fall in love with that downtown high-rise in Austin filled with luxury amenities, a short-term rental condo in Galveston ideal for investors, or an investment unit in Houston’s Museum District with heavy commercial foot traffic, it's essential to understand whether the property is warrantable or non-warrantable—and what that means for your financing options.

What Is a Warrantable Condo?

A warrantable condo meets guidelines set by government-backed agencies like Fannie Mae and Freddie Mac. These properties are considered lower-risk because they’re eligible for government-sponsored backing. In fact, when a condo is warrantable, it’s viewed almost the same as a single-family home—making it much easier for buyers to qualify for conventional financing with lower rates, faster approvals, and down payments as low as 3%. To be warrantable, a condo must meet certain conditions: the building must be financially stable, have no major legal issues, maintain adequate reserves in the HOA, limit commercial space and short-term rentals, and have a strong owner-occupancy ratio.

Warrantable Condo Criteria:

• At least 50% of the units are owner-occupied

• No single person or company owns more than 20–25% of the building

• The HOA contributes 10% or more of its annual budget to reserves

• The condo project isn’t involved in active litigation

• There are limits on short-term rentals, commercial usage, and HOA delinquencies

Texas Spotlight For a Warrantable Condo:

If you're shopping for a condo in The Independent in Austin (aka the “Jenga Tower”), you'll find it’s considered warrantable thanks to its high owner-occupancy and strong HOA reserves—making it an excellent fit for traditional financing.

What Is a Non-Warrantable Condo?

A non-warrantable condo fails to meet one or more of the above criteria. These properties are common in vacation destinations like Galveston, where short-term rentals dominate, and in new construction buildings that are still under developer control.

Common Reasons a Texas Condo Might Be Non-Warrantable:

• Short-term rentals are allowed (common in beach condos along the Gulf)

• Too many units are owned by one investor

• The building is still under construction or under developer control

• The HOA has legal disputes, inadequate reserves, or delinquent dues

• The property is part of a condotel or fractional ownership structure

Texas Spotlight For Non-Warrantable Condos: Natiivo Austin

Located in the Rainey Street District of downtown Austin, Natiivo is specifically designed to integrate short‑term, hotel‑style rentals into condominium living. Owners are encouraged—and legally permitted—to list their units on Airbnb or similar platforms, blurring the line between private residence and hospitality property. That homesharing structure generally pushes the building into non‑warrantable territory, making Fannie/Freddie‐style financing difficult—even though it offers top‑tier amenities and a prime location.

Financing Options for Non-Warrantable Condos

If your dream condo doesn’t qualify for conventional financing, you’re not out of luck. With the right broker, you can explore non-QM (non-qualified mortgage) options or portfolio loans that are flexible enough to accommodate unique properties.

What Are Non-QM Loans?

Non-QM loans are mortgages that don’t meet Fannie or Freddie guidelines but are still fully documented and secure. They're perfect for self-employed buyers, real estate investors, or high-net-worth individuals who don’t fit the mold of traditional lending.

Why Non-QM Loans Work for Texas Condo Buyers:

• Ideal for bank statement and asset depletion borrowers — bank statement loans use 12 to 24 months of personal or business bank deposits to calculate income, perfect for self-employed buyers who don’t show high taxable income. Asset depletion loans allow you to qualify based on your liquid assets—like investment accounts or retirement funds—by turning your savings into qualifying monthly income, ideal for retirees or high-net-worth individuals with minimal traditional income.

• Can accommodate crypto-backed mortgages or alternative income sources — for example, our non-QM lenders allow borrowers to use their cryptocurrency holdings as part of an asset depletion loan, converting digital assets like Bitcoin or Ethereum into qualifying income without requiring liquidation. Alternative income sources might also include rental income, royalty payments, or other non-traditional revenue streams not typically accepted by conventional lenders.

• DSCR (Debt Service Coverage Ratio) loan options available for investor-friendly condos — these loans qualify based on the property's rental income rather than personal income, making them ideal for condos with high rent potential, including non-warrantable units used as long-term or short-term rentals

Why You Need a Mortgage Broker—Especially in Texas

Texas real estate is anything but one-size-fits-all. Between new high-rise developments in Austin, resort-style properties in Galveston, and mixed-use condos in Houston, many buyers find themselves navigating complex warrantability rules.

A mortgage broker gives you access to both conventional and non-QM loans, allowing you to finance your property with confidence—regardless of whether it’s warrantable.

Here’s what a broker brings to the table:

• Access to dozens of lenders, not just one

• Experience with Texas HOA reviews, warantability checks, and property risk assessments

• Familiarity with non-QM programs for condos across the state

• Creative structuring for crypto-holders, business owners, and investors

At LendFriend, we help you every step of the way—from reviewing a building’s warrantability status, to exploring the best conventional and non-QM loan options. We specialize in helping buyers qualify using bank statements, assets, or even crypto—so you’re not boxed out of homeownership just because you don’t fit a traditional mold. And once your loan is in motion, our team works to close quickly and keep the process stress-free.

Texas Condo Hotspots Where Warrantability Often Comes Into Play