🏦 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)

🧠 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)

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