Non-warrantable condos: what makes a project ineligible, and what a board can fix

Last updated October 8, 2026

Lenders often call a condo project “non-warrantable” when it does not meet the agency rules for loans they can sell to Fannie Mae. Some of those problems are fixable by the board. Others come from how the project is built or owned.

Scope and date. This guide summarizes Fannie Mae's Selling Guide as published: the topics B4-2.1-03, Ineligible Projects and B4-2.2-01, Full Review Process, both dated August 5, 2026 on the pages we read, checked October 8, 2026. Freddie Mac and FHA have their own rules, and individual lenders may add requirements. Rules change, so read the current text before relying on any figure here. This is general information, not legal or lending advice.

The conditions, and who can fix them

Condition	What the Selling Guide says	Can the board fix it?
Critical repairs	Ineligible with unfunded repairs costing more than $10,000 per unit that should be undertaken within 12 months; with mold, water intrusion or potentially damaging leaks; with advanced physical deterioration; after failing a mandatory structural, safety or habitability inspection; or under an evacuation order until the unsafe condition is remediated.	Usually yes, by completing or funding the repairs and documenting them.
Replacement reserves	The budget must provide for replacement reserves of at least 10% of the budget, calculated as the annual budgeted reserve allocation divided by annual budgeted assessment income. A lender may instead use a reserve study that is prepared by an independent third party with reserve-study expertise, is no more than three years old, and whose highest recommended reserve allocation is in the budget.	Yes. This is a budget decision, or a reserve study the board can commission.
Unit delinquencies	No more than 15% of the total units may be 60 or more days past due on common expense assessments, with the same threshold for each special assessment.	Partly. Consistent collection practices help, but it depends on owners paying.
Commercial space	The total space used for nonresidential or commercial purposes may not exceed 35%.	No. It is a feature of the building.
Association business income	Ineligible if the association receives more than 10% of its budgeted income from non-incidental business arrangements.	Sometimes, by changing those arrangements.
Single-entity ownership	Limits apply to how much one entity may own. For condo projects of 21 or more units the limit is 20%; the guide sets separate limits for smaller projects.	Not quickly. It depends on unit sales.
Pending litigation	Ineligible when the association, sponsor or developer is in litigation over safety, structural soundness, habitability or functional use. A minor-matter exception exists when damages and legal expenses are not expected to exceed 10% of the project's funded reserves; personal injury or death claims generally do not qualify as minor.	No, not by the board alone. It requires resolution.
Project type	Timeshare or fractional ownership, hotel or motel operation, multi-dwelling projects, continuing care facilities and similar structures are ineligible.	No. It describes what the project is.

What boards can do in practice

Document repairs. If a critical repair is on your list, complete it or fund it, and keep the records a lender will ask for: scope, cost, contractor and completion.
Test your budget against the 10% reserve calculation, or commission an independent reserve study if the lender may use one. A baseline funding method cannot be used to waive the 10% requirement.
Track delinquencies by unit, including special assessments, so you know where you stand against the 15% threshold before a lender asks.
Keep your minutes and financials in order. Lenders review them, and gaps slow down a unit sale.
Talk to your attorney and your lender about anything involving litigation or unusual ownership.

Where the rules come from

Fannie Mae Selling Guide, B4-2.1-03, Ineligible Projects
Fannie Mae Selling Guide, B4-2.2-01, Full Review Process

Figures above are quoted or paraphrased from those pages as read on October 8, 2026. If a number matters to a decision, confirm it in the current Selling Guide, because the guide is updated over time.