🏦 What Are Fannie Mae and Freddie Mac?
Fannie Mae and Freddie Mac are government-backed entities that buy mortgage loans from lenders. Their approval is crucial because:
Most banks/lenders follow their guidelines when deciding whether to issue a mortgage.
If a condo building isn’t eligible for Fannie/Freddie backing, it becomes harder (and more expensive) for buyers to get a loan on a unit there.
As a result, your future buyers—and even your tenants if they hope to buy—might not be able to get financing, limiting your resale pool and driving down value.
🧾 What Condo Buildings Must Meet to Be “Warrantable”
A condo is considered “warrantable” if it meets Fannie/Freddie’s guidelines. If not, it’s “non-warrantable.”
đź”’ Fannie/Freddie Requirements for Warrantable Condos:
Here are key criteria that can make or break warrantability:
🧨 What Happens if a Condo Is Non-Warrantable?
If a building doesn’t meet these criteria:
Buyers must seek portfolio loans (from lenders who keep the loan themselves).
Those loans:
Have higher interest rates
Require larger down payments (often 20-30%)
May have shorter terms (e.g. 5/1 ARMs)
Many buyers (especially first-time or FHA buyers) can’t qualify or won’t bother.
👉 For you as an investor, this creates:
Fewer exit strategies (resale is tougher)
Lower buyer demand = lower resale value
More risk if you want to refinance down the line
DC-Specific Risk Factors
In DC, many condos are:
Converted rowhomes or small buildings with fewer than 10 units (vulnerable to single-entity ownership issues)
Older properties that might face:
Reserve shortages
Deferred maintenance
Upcoming special assessments
Located in neighborhoods with high rental activity (hurts owner-occupancy ratios)
đź§ Tip: How to Protect Yourself
Before buying, ask your agent or lender to:
Request a condo questionnaire from the HOA
Ask if the unit is in a warrantable or non-warrantable building
Look at the budget and reserve study - (What to look for during Condo Document Review)
See if the building is FHA or VA approved (a good sign of financing health)