Last reviewed: September 25, 2026 · Chicago Condo Loans Editorial Team · How we research
Quick answer: A warrantable condo is in a building that meets Fannie Mae or Freddie Mac project standards, so a lender can finance it with a regular conventional loan. A non-warrantable condo is in a building that fails at least one of those standards, for example because of a lawsuit about safety or construction, urgent repairs the association can’t pay for, one owner holding too many units, too much commercial space, or hotel-style operations. You can still buy a non-warrantable condo, but you’ll usually need a portfolio or non-QM loan, which often means a larger down payment and a higher rate.
This is part of our complete guide to condo loans in Chicago.
Why “warrantable” matters
Most U.S. mortgages are sold to Fannie Mae or Freddie Mac after closing. When a lender sells a loan, it promises (“warrants”) that the loan and property meet the agency’s rules. For condos, those rules include standards for the whole building, not just your unit. If the building doesn’t meet them, the lender can’t sell the loan to the agencies. It has to keep the loan or sell it elsewhere, and it prices that risk into your terms.
Because the building is the issue, two buyers with identical finances can get very different loan offers for units in different buildings.
What makes a condo building non-warrantable
Fannie Mae lists ineligible project characteristics in its Selling Guide, section B4-2.1-03. Freddie Mac’s rules are similar. The most common problems:
| Issue | Fannie Mae standard (summary) |
|---|---|
| Litigation | Pending lawsuits involving the association over safety, structural soundness, habitability, or functional use make a building ineligible. Minor litigation, such as neighbor disputes, insured claims within policy limits, collecting unpaid assessments, or claims no larger than 10% of the project’s funded reserves, generally doesn’t. |
| Critical repairs and safety | Needed repairs that significantly affect safety, structure, or habitability; a failed mandatory structural or safety inspection; significant water intrusion or mold; or unfunded repairs costing more than $10,000 per unit that should be done within 12 months. Buildings under evacuation orders are ineligible until repaired and deemed safe. |
| Single-entity ownership | One person or entity owning more than 2 units in an 11–20 unit building, or more than 20% of units in a building of 21 or more units. For a purchase, this can be waived in limited cases if the entity owns 49% or less and is actively selling units. |
| Commercial space | More than 35% of the project or its building is commercial or nonresidential space. |
| Hotel-like operations | The building is licensed or run like a hotel or resort: rental pools, required profit-sharing, front-desk registration, daily cleaning, short-term rental management, or restrictions on owners living in their units. |
| Business income | The association earns more than 10% of its budgeted income from non-incidental businesses such as a restaurant or spa it operates. Limited exceptions allow up to 15% from association-owned recreational amenities or rental of foreclosed units. |
| Delinquent dues | More than 15% of units are 60 or more days behind on assessments (a full-review standard). |
| Termination or insolvency | The building is going through a deconversion, dissolution, bankruptcy, or receivership, including a pending vote on one. |
| Other | Timeshares and fractional ownership, some continuing-care communities, and priority-lien rules for unpaid assessments beyond Fannie Mae’s limits. |
One restriction is gone. In March 2026, Fannie Mae retired its 50% limit on investor-owned units in established buildings (Lender Letter LL-2026-03). A building with lots of renters is no longer non-warrantable for that reason alone under Fannie Mae’s rules.
Chicago buildings that often run into problems
Every building is different, but these Chicago situations come up often:
- High-rises with façade or structural work. Chicago requires buildings 80 feet or taller to have their exteriors professionally inspected on a regular cycle. A failed inspection, or major unfunded repairs identified in one, can trigger Fannie Mae’s critical-repair rules until the work is funded and underway or complete.
- Older buildings with thin reserves. Vintage courtyard buildings and mid-century high-rises may face costly roof, masonry, plumbing, or elevator work. If reserves are low and big repairs are overdue, the building can fall into the critical-repair or reserve problem.
- Mixed-use buildings. Buildings with ground-floor retail or offices need to stay at or under 35% commercial space.
- Developer or investor-held units. In new or recently converted buildings, a developer or investor may still own a large block of units, which can break the single-entity limit.
- Hotel-condo buildings downtown. Units in buildings run with hotel services or rental programs are typically non-warrantable.
- Buildings facing deconversion. A pending sale of the whole building, which in Chicago needs an 85% vote, makes a project ineligible while it’s underway.
The 2026 change: more buildings get a full review
Before August 3, 2026, many established buildings qualified through Fannie Mae’s “limited review” or Freddie Mac’s “streamlined review,” which checked far less. For conventional loan applications dated on or after August 3, 2026, those lighter reviews are retired. Most established buildings now need a full review, which looks closely at the budget, reserves, delinquencies, litigation, and repairs.
Two consequences for Chicago buyers:
- More problems surface. Issues that a limited review didn’t examine, such as thin reserves or upcoming repairs, now get checked. Some buildings that were effectively financeable before may now be non-warrantable.
- Small buildings get an easier path. Buildings with 10 or fewer units that aren’t part of a master association can often use Fannie Mae’s waiver of project review. That helps the many two-flat, three-flat, and six-flat conversions across Chicago neighborhoods.
Reserve standards are also rising: from 10% to 15% of the budget for full reviews starting January 4, 2027, and budgets must now include the highest reserve contribution recommended in the building’s reserve study.
How to find out if a condo is warrantable
- Ask before you offer. Your agent may know the building’s history. Your lender can often check it in Fannie Mae’s Condo Project Manager system, which shows whether a project has already been reviewed or flagged.
- Get the condo questionnaire early. The lender sends it to the association or management company. It covers delinquencies, litigation, insurance, commercial space, and ownership concentration.
- Read the Section 22.1 disclosures. Illinois requires the association to provide the budget, reserve status, planned capital expenditures, pending lawsuits, and insurance information to buyers within 10 business days of a written request.
- Look for red flags: planned special assessments, recent façade or structural reports, lawsuits, low reserves, a single owner with many units, and rental or hotel programs.
- Keep a financing contingency in your contract long enough for the review to finish.
How to finance a non-warrantable condo
| Option | How it works | Tradeoffs |
|---|---|---|
| Portfolio loan | A bank or credit union keeps the loan instead of selling it to Fannie Mae or Freddie Mac | Down payment and rate set by the lender, often 20%–25% or more down; fewer lenders to compare |
| Non-QM loan | A loan made outside agency rules, often sold to private investors | Usually higher rates and fees; terms vary widely |
| FHA or VA | These programs use their own condo rules. A building that fails a conventional review may still meet FHA or VA standards | The project (or, for FHA, sometimes the unit) must be approved under that program |
| Cash, then refinance | Buy with cash and refinance after the building’s issue is resolved | Requires cash; refinancing depends on the building becoming warrantable |
If the problem is temporary, like a lawsuit nearing settlement or a funded repair project nearly done, ask when it will be resolved. A building can become warrantable again, and you may be able to refinance into a conventional loan later.
Frequently asked questions
Is a non-warrantable condo a bad buy?
Not necessarily. It means the building doesn’t meet agency lending standards, and the reason matters. A single large owner is a different risk from a structural problem. But non-warrantable status can also shrink the pool of future buyers who can get financing, which can affect resale.
Can a building go from warrantable to non-warrantable?
Yes. A new lawsuit, a failed inspection, rising delinquencies, or unfunded repairs can change a building’s status. So can the switch from limited to full review in August 2026.
Does warrantable mean FHA-approved?
No. Warrantable refers to Fannie Mae and Freddie Mac standards for conventional loans. FHA and VA approvals are separate. A building can have any combination of these.
Are small Chicago condo buildings warrantable?
Many can use Fannie Mae’s waiver of project review, which covers buildings with 10 or fewer units that aren’t part of a master association, as long as they meet basic insurance requirements and have no critical repair or safety problems.
Who decides whether a condo is warrantable?
The lender, applying Fannie Mae or Freddie Mac rules to information from the association. There’s no single public list of warrantable buildings, so ask your lender to check the specific building.
Sources
- Fannie Mae Selling Guide B4-2.1-03: Ineligible Projects
- Fannie Mae Lender Letter LL-2026-03
- Freddie Mac Bulletin 2026-C
- Illinois Condominium Property Act, 765 ILCS 605/22.1
Educational content only, not lending or legal advice. See our Disclaimer.