Physician Mortgage Loans and Condos -- A Warning

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Total nerd
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Mar 14, 2002
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I didn't realize what an issue "warrantable" vs. "non-warrantable" condominiums would be when looking for a condo home post-residency with a physician mortgage loan. My new understanding is that warrantable is slang for a condominium project that has been approved under rules for condos for financing by Fannie Mae / Freddie Mac. For more information, see:

The key here is:

For borrowers to obtain FHA mortgages, the community has to pass an approval process documenting healthy finances, insurance, among other things. As of late May, 10,020 condo developments had received approval – a fraction of the roughly 158,000 communities around the U.S.

In my community, there is exactly *1* warrantable condo project out of dozens of condo projects. According to the article, nationwide only ~6% of condos are listed as warrantable.

The problem is that physician mortgage loans that consider condos require warrantable condos.

Non-warrantable condos can be financed by many lenders, but they require 20-35% down, and like physician loans add on the order of 0.5 - 1% to the usual mortgage rates. The large down-payment is what we're hoping to avoid with a physician loan coming out of residency.

In researching this, I contacted every physician loan lender for my state on the White Coat Investor's website ( and several other lenders.

How do you know if a condo you're interested in is warrantable? You can search these two lists:

FHA approved list (warrantable) here:
Fannie/Freddie posts a list of approved condos here:

Unfortunately, as I pointed out earlier, there are very few condo projects on these lists. The condo board typically applies for these designations, and that is time-consuming and costly. Unless the condo board is really trying to sell units, they often don't even bother with this process.

As an aside, there are also other considerations as to whether a condo is actually warrantable which has little to do with its financial security or whether you'd want to live there. For example, to be eligible for warrantability, the majority of units in the condo have to be owner occupied / 2nd home and not rented. This has advantages and disadvantages. Where I currently rent, the building is actually listed as warrantable. However, it constantly rests at the warrantability maximum allowable rented units (49%). This means that if you buy a unit in this condo building, you will almost certainly not be able to rent it out later if you have to leave. There is a 5 year waiting list. During the housing meltdown, this led to a high foreclosure rate, a lot of people taking a loss on their units if they had to move away, and others sitting on empty units paying tax/HOA because they can't be rented and they don't want to sell for a loss. The realtors aren't exactly forthcoming about this to new buyers, who all assume that they can rent their condo if they have to move away later.

For physician loans, the companies financing and selling the mortgages are making up the rules as they go. Physician loans fall into a category of "portfolio" loans, since they can't be sold outside of the lender. For standard loans, downpayments more than 20% or PMI are required (and if it's a condo it has to be warrantable), and physician loans are in part designed with less than 20% downpayment without PMI. Since the rules for these portfolio loans are made up by the individual lenders, a few lenders have decided that their physician loans can be applied to condos besides the few that are listed as warrantable. Many lenders do make loans on non-warrantable condos outside of physician loans, but physician loan and non-warrantable condos are very rarely allowed in the same portfolio loan.

Thus, if the lender is interested in providing loans to condos beyond the miniscule number of publicly listed buildings, and you identify a condo that you'd like to finance, the lender will request information from the condo board to determine one of three statuses. The condo board requires a fee for completing the paperwork that you'll have to pay (typically $100-$150), though the selling realtor might already have the information. This should be done before entering a contract to buy, because the financing could easily fall through.

The lender could find the property:
1. Warrantable --- Actually they meet Freddie/Fannie standards for financing.
2. Acceptable -- Doesn't meet Freddie/Fannie standards for some reason but is acceptable to the lender (pending litigation against the building which could be frivolous, over 50% rentals but still acceptable to the lender, etc)
3. Unacceptable

I talked to the physician loan lenders in my state about this, as well as some additional lenders who do not have physician loans but provide loans with less than 20% down and no PMI like Sofi. Most of the representatives seemed totally clueless about these issues. As of the time of posting:

BancorpSouth has offered to apply their standard physician loan program (5-10% down up to $1.5 million) to approved non-warrantable projects. However, they only offer 5/1 ARM and 10 year fixed.

BBVA Compass is willing to review projects and if found to meet the criteria for warrantability even if not publicly posted as such, will apply the usual physician loan program to that (5% up to $1 million, and that includes more products like 30 year fixed). If acceptable to their review, but not warrantable, they require 20% down.

There were two other companies I won't name who would consider a custom loan with low downpayment but insane rates (4% more than current market rates) for acceptable non-warrantable condos. As a junior physician interested in purchasing a condo, I wish that more mortgage companies would consider the vast majority of condos for their physician loan programs. As it stands, most condos are not eligible for most physician loan programs.

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You are an attending, save up for 20% down 15yr fixed mortgage, until then rent and live like a resident (this is whitecoatinvestor style).
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Depending on the market / commute / available rentals, it is not always feasible to rent until you can get a conventional mortgage (ie: decent rentals may not exist in every market). What if the nearest decent rental requires an hour commute? The extra $$ you'll make by working that hour instead of sitting in your car will more than pay for the difference between renting and buying.

Also , Keeping large amounts of cash on hand when you have high interest student loans doesn't make much sense either.

Physician loans aren't always a bad option, it just really depends on the market that you're in, (though I really wouldn't buy as a resident or a 1st year attending).

This is really good info for someone that may be looking to use a physician loan for a condo. Thanks OP!
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