Selling a Condo in WA? Get It Preapproved First

If you own a condo in Washington and you’re thinking about selling, this one’s for you. Most sellers get their home ready with paint and staging — but very few think about whether their condo project itself is financeable and what the financing options are.

Why your condo’s financing eligibility matters when you sell

When you sell a single-family home, the buyer’s financing is mostly about them — their credit, income, and down payment. Condos are different. With a condo, the lender isn’t just underwriting the buyer. They’re underwriting the entire condo project: the HOA’s finances, the reserve fund, the insurance coverage, the owner-occupancy ratio, and whether there’s pending litigation.

If your condo project doesn’t meet a lender’s guidelines, your buyer’s financing can fall apart late in the transaction — sometimes just days before closing. I’ve seen sales collapse not because of the buyer, but because the condo association hadn’t responded to a questionnaire, or the reserve study showed a funding shortfall nobody had flagged.

Getting your condo “preapproved” before you list means finding out, in advance, what type of financing your unit is actually eligible for whether it’s conventional, FHA, or neither — so you’re not finding out the hard way, mid-escrow.

What does it mean to get a condo preapproved?

This isn’t about your personal credit — it’s about the project. Before I can lend on a condo, I have to determine whether the HOA and building meet conventional and/or FHA condo project requirements. That review looks at things like:

• Percentage of units that are owner-occupied vs. rented
• How much of the budget is allocated to reserves, and whether it’s adequately funded
• Whether any single entity owns too many units in the project
• Percentage of commercial or non-residential space in the building
• Delinquency rate on HOA dues
• Any pending or active litigation involving the HOA
• Insurance coverage — master policy, flood (if applicable), and fidelity bond
• Whether the project is on HUD’s approved condo list (a separate check from conventional warrantability)

A lender will typically require a condo questionnaire to be completed by the Homeowners Association (HOA) or property manager.

Warrantable vs. non-warrantable: what’s the difference?

Warrantable means your condo project meets conventional (Fannie Mae and Freddie Mac) guidelines, which opens the door to conventional financing — generally the widest buyer pool, the best rates, and the lowest down payment options.

Non‑warrantable means the project fails one or more of those guidelines such as one entity owning too many units, an underfunded reserve, active litigation, too much commercial space, and so on. It doesn’t mean your condo can’t be financed. It means conventional loans are off the table, which changes the type of financing that’s available and potentially reduces the amount of potential buyers.

Don’t forget FHA: it’s a separate approval, not the same thing as warrantable

Conventional warrantability and FHA approval are two different systems, evaluated by two different sets of guidelines. A project can be conventionally warrantable and not FHA-approved, FHA-approved and not conventionally warrantable, both, or neither. Knowing your project’s conventional status doesn’t tell you anything about its FHA status — each has to be checked separately.

HUD maintains its own list of approved condo projects. If your building isn’t already on that list, no buyer can use an FHA loan to purchase a unit in it — full stop, regardless of how strong that individual buyer’s financial profile is. The project either has to already be HUD-approved, or someone has to put it through HUD’s approval process before an FHA loan can close.

This matters for sellers because FHA buyers make up a real share of the market, particularly for lower-priced units and first-time buyers who need FHA’s lower down payment. If your project isn’t HUD-approved, you’re not just narrowing financing options — you’re closing the door entirely to an entire category of buyer, without ever knowing it happened.

As part of your condo preapproval review, I’ll check whether your project is already on HUD’s approved list. If it isn’t, we can talk through whether it’s worth pursuing HUD approval before you list — something your HOA or management company typically needs to be involved in, since it requires project-level documentation, not just information about your unit.

Why finding this out before you list protects your sale

Getting the project reviewed early gives you three real advantages:

• You can market to the right buyers. If your condo is warrantable and/or FHA-approved, it tells buyers their financing options are wide open. If the condo is non-warrantable, it’s helpful to let potential buyers know that financing is still available.
• You avoid last-minute surprises. If there’s an issue such as a lapsed insurance policy, an incomplete questionnaire, a reserve shortfall, or a lapsed HUD approval; you find may have time to fix it or price around it instead of dealing with it during a transaction.
• You keep more buyers in play. Some buyers can only qualify for conventional financing, and others depend on FHA’s lower down payment to buy at all. If your project isn’t eligible for one or both and nobody knew going in, you may have turned away buyers who never got the chance to make an offer with the right loan product.

If your condo isn’t warrantable or FHA-approved, what are your buyer’s options?

Neither finding is a dead end — it just changes the financing conversation. Depending on why the project doesn’t meet guidelines, your buyer may still have several paths:

• Non-QM condo loans. Portfolio and non-QM can finance non-warrantable condos, often with more flexible project requirements. Depending on the project, this type of financing may have a higher rate and/or require a larger down payment.
• Larger down payment. Some non-warrantable condo programs become available at higher down payment thresholds, since more buyer equity offsets project risk.
• Pursuing HUD approval. If FHA buyers are a meaningful part of your likely buyer pool and the project isn’t currently on HUD’s list, the HOA can pursue HUD approval. It takes lead time and HOA cooperation, so it’s worth starting well before you list, not after an FHA buyer’s offer falls through.
• Cash buyers. Project eligibility doesn’t affect a cash purchase at all — conventional and FHA requirements only come into play when a lender is involved. Cash buyers are typically able to negotiate a lower price for a home compared to an offer with financing. On a positive note, cash transactions can close faster than one that involves a mortgage.
• Waiting on a project fix. Sometimes the issue is temporary, such as a litigation matter that’s close to resolution, or a reserve study update already underway. If you’re not in a rush to sell, it may be worth waiting for the HOA to resolve the issue so the project becomes warrantable or FHA-eligible again.

The key is knowing which of these applies to your building before you’re under contract, so you and your agent can set expectations with buyers from the start — instead of losing a deal to a financing surprise.

Get your condo reviewed before you list

If you’re considering selling your Washington condo, let’s get the project reviewed first. I can request the questionnaire from your HOA, check both conventional warrantability and HUD/FHA approval status, and tell you exactly what type of financing your buyers will qualify for — before your listing photos are even scheduled.

Read: Financing a Condo in Washington

Read: Condo & HOA Red Flags in Washington