Condotel And Non-Warrantable Condo Financing Guidelines

This Article Is About Condotel And Non-Warrantable Condo Financing Guidelines

Condotel and Non-Warrantable Condo Financing are portfolio loans. Portfolio loans are non-conforming loans. Lenders funding the loan normally hold the loan in their investment portfolio and do not sell it on the secondary mortgage market. Portfolio loans do not follow Fannie Mae and Freddie Mac Agency Mortgage Guidelines. Each portfolio lender has its own mortgage guidelines

  • Portfolio Loans which means that Fannie Mae and Freddie Mac does not purchase them
  • Mortgage lenders who originate and funds the Condotel and Non-Warrantable Condo Financing needs to keep the loan on their books
  • All Condotel and Non-Warrantable Condo Financing loans are adjustable rate mortgages, ARM
  • They are 30-year mortgages
  • We offer 3/1 ARM, 5/1 ARM, 7/1 ARM Condotel, and Non-Warrantable Condo Financing
  • The index is based on the one-year treasuries, Cost Maturity Treasuries ( CMT ) and the margin is set at 3.0%
  • All adjustable rate mortgages
  • The new adjustment rate after the initial fixed rate cannot be lower than the starter rate

In this article, we will cover and discuss the financing options for condotel and non-warrantable condos.

Underwriting Update On Condotel And Non-Warrantable Condo Financing

What are Condotel And Non-Warrantable Condo Financing Guidelines

There are two parts of underwriting a Condotel unit and Non-Warrantable Condo Financing.

  • First, the Condotel or Non-Warrantable Condominim Complex needs to be approved
  • Our investor does not want any pending large lawsuit against the Condominium Homeowners Association that is structural in nature
  • Or does not want to approve a condominium complex that is under bankruptcy or in financial stress
  • No substantial building violations that involve structural issues
  • The condominium complex needs sufficient reserves
  • No more than 10% of the condotel and/or non-warrantable condominium units can be under foreclosure

No more than 10% of the condotel and/or non-warrantable condominium owners can be in default with their homeowners association dues.

Condo Unit Requirements

In order to get a condotel unit or non-warrantable condominium unit approval, the condotel unit or non-warrantable condominium unit needs to be the following:

  • at least 500 square feet
  • have at least one bedroom
  • have a fully functional kitchen
  • Minimum loan size for both condotel and non-warrantable financing is $100,000

Condotel Loan Guidelines

What are Condo Unit Requirements

To qualify for condotel financing here the requirements:

  • The minimum down payment is 25% down payment if the proposed condotel purchase is the borrower’s primary or second home if the condotel mortgage loan borrower has a primary home, a second home
  • If the condotel purchase will be the third home, then the subject condotel purchase will be considered an investment condotel purchase

With investment condotel purchases, a 40% down payment is required.

Non-Warrantable Condominium Guidelines

Non-Warrantable condominiums are condominium complexes where 51% or more of the units are non-owner occupant units and do not meet Fannie Mae and Freddie Mac conforming lending guidelines.

  • 20% down payment is required for non-warrantable condominium purchases as long as it is the borrower’s first or second home
  • 40% down payment is required if the non-warrantable condominium is an investment property

Condotel And Non-Warrantable Condo Financing Borrowers Requirements

What are the guidelines regarding the lack of warranty

To qualify for condotel and non-warrantable condominium financing, the minimum credit score required is 680 credit scores.

  • Condotel and Non-Warrantable Condominium portfolio lenders will require one-year reserves
  • Reserves required are for each and every property that the borrower owns including the condotel and non-warrantable condominium purchase
  • The reserves do not have to be in cash
  • It can be in stocks, bonds, and retirement accounts
  • Maximum debt to income ratios allowed is 43% DTI

No bankruptcy, foreclosures, deed in lieu of foreclosures, short sales in the past 4 years.

1 Comment
  1. Vitaly Savenok says

    Detached condo. New construction. Closing date 3/4/2021.
    Just found a collection account on my credit report which is not mine. It dropped my score from 757 to 659 in 1 day. Submitted a dispute to Equifax. Received a letter from the company( Southern California Edison) stating they linked the collection account incorrectly to my name. In this case, can the dispute I made still stop me from getting a mortgage?

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