A buyer looking for a condo in Monterey faced a setback just before loan approval. The property itself was not the issue. The problem was the building. The rental unit ratio in that complex was too high, leading the bank to inform the buyer that they would only proceed with a high-interest non-warrantable condo loan instead of a standard conventional loan. This is why it's essential to first assess the financial status of the entire building rather than just the unit when viewing condos.

Fannie Mae's criteria are clear. If the percentage of delinquent units exceeds 15%, or if the rental unit ratio exceeds 50%, or if the reserve fund is less than 10% of the budget, or if there are pending lawsuits, the property is classified as non-warrantable. Even one of these issues can significantly change the loan terms. Before making an offer, it's advisable to request a condo certification survey from the HOA to check these items first.

Looking at the prices, as of June 2026, the median home price in Monterey is $1,248,500, with the average sale price at $1,312,361. For condos specifically, the median price for a one-bedroom is $492,000, while a two-bedroom is around $712,500. Compared to single-family homes, condos have a lower entry barrier. However, it's also important to consider that the median HOA fee for condos in Monterey County is $413 per month, which affects the actual monthly burden.

The building structure must also be addressed. According to California SB 326, condos managed by an HOA must undergo inspections of external structures, such as balconies, every nine years. The first inspection deadline for condos has already passed on January 1, 2026. If the inspection has not yet been conducted, it means a violation of regulations and poses a risk of fines. Conversely, if the inspection has been completed, it's important to check whether the results have been reflected in the reserve study and if any repairs are needed.

The order of checks should be as follows. First, determine warrantability through the condo certification survey. Second, review the financial statements and budget from the last 2-3 years. Third, examine the SB 326 inspection history and reserve study. Fourth, check the minutes of the management meeting for any planned special assessments. These four items should be filtered before considering the sale price.

The importance of warrantability becomes clear when comparing loan rates. Condos classified as non-warrantable often have higher down payment requirements and significantly higher interest rates than conventional loans. Even if you can manage with cash at the time of purchase, if a new buyer faces the same issues when reselling later, the liquidity of the property itself decreases. Therefore, warrantability affects not only the loan I receive now but also the resale value years down the line. From my long-term observation of the market, condos priced significantly lower than market value often have warrantability issues.

From an investment perspective, Monterey is a market with tourist demand and unique rental demand from the Monterey Bay area. However, buildings near the coast tend to see a greater increase in insurance premiums, so when calculating rental yields, it's essential to factor in the potential for rising management fees and insurance costs. The seasonal difference in vacancy rates between peak tourist times and off-peak times should also be considered when developing rental strategies.

Buyers coming from other states should also take into account that property tax and insurance systems differ from their previous residences. California uses Proposition 13, which assesses property tax based on the purchase price, so buyers from states where property tax is reassessed annually based on market value may find this difference initially unfamiliar. The same goes for insurance. In coastal counties, obtaining fire insurance can be challenging, so getting quotes from insurance companies before making an offer can help reduce surprises after closing. Families considering school districts should refer to GreatSchools ratings but verify assigned schools directly before purchasing. This article is not investment advice, and it is recommended to consult with a professional before finalizing any contracts.