🏦 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.

đź§ľ 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)

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