Condotel Financing Mortgage Guidelines: Your 2025 Guide to Buying or Refinancing a Condotel. If you’ve ever dreamed of owning a vacation home that generates rental income, condotels might be your perfect solution. In this updated guide, we’ll break down everything you need to know about condotel financing mortgage guidelines—whether you’re a first-time buyer, investor, or looking to refinance. John Strange, a senior mortgage loan originator at Gustan Cho Associates, says the following about condotel financing mortgage guidelines:
Condotels are condo units within a hotel, offering the best of both worlds: you can enjoy your vacation home while earning rental income when you’re not using it.
However, getting financing for a condotel can be tricky, as they fall into the non-warrantable condo category, meaning they don’t qualify for Fannie Mae or Freddie Mac financing. Let’s dive into the condotel mortgage guidelines so you can confidently navigate the process and secure your dream condotel. In the following paragraphs, we will cover the condotel financing mortgage guidelines.
What is a Condotel and Why Consider Buying One?
A condotel (or condo-hotel) is a condominium unit within a hotel that you can own outright. While not staying there, you can rent it out, with the hotel management handling the rentals, maintenance, and guests. This offers you the convenience of a vacation home with hotel amenities, such as housekeeping, room service, and concierge, but without the stress of daily management.
Condotels are popular in vacation hotspots like Florida, California, and Las Vegas, where high tourist traffic provides owners with a steady income stream. However, because of their hotel-like operations, condotels are considered non-warrantable, meaning conventional mortgages are unavailable. But don’t worry—there are options!
Condotel Financing Mortgage Guidelines: How It Works in 2025
Since condotel financing mortgage guidelines are portfolio loans and don’t qualify for Fannie Mae or Freddie Mac financing, you’ll need a non-QM or portfolio loan. Condo hotel loans are offered by private lenders who keep the loan on their books, making them more flexible. However, condotel loans often come at higher interest rates than conventional loans. Here’s what you need to know about qualifying for a condotel financing mortgage guidelines in 2025:
- Minimum down payment: 25% for a primary or second home, 40% if it’s an investment property.
- Credit score: A minimum of 680 is typically required.
- Reserves: Borrowers need to show one year of reserves for all properties owned; these reserves can be in various forms, such as retirement accounts or other assets, not just cash.
- Debt-to-income ratio: Maximum of 40%.
- Loan amount: The loan amount typically starts at $100,000, but some lenders may offer higher limits depending on the property’s value and your financial profile.
Condotel financing often uses adjustable-rate mortgages (ARMs). An ARM is a loan with a fixed interest rate for a set period, usually 3, 5, or 7 years. After this initial period, the interest rate changes each year based on a specific index. One common index is the Cost Maturity Index (CMT), which shows the average earnings on U.S. Treasury securities and sets the standard for interest rate adjustments. After the fixed period ends, your interest rate will change according to this index plus a set margin.
Key Updates for Condotel Financing Mortgage Guidelines
As the real estate market evolves, so do the rules for condotel financing. Here are the key changes you need to be aware of for 2025:
- Higher Loan-to-Value (LTV) Ratios:
- You can get up to 75% LTV on primary and second homes. For investors, the max is 60% LTV. This is an increase from the previous cap, allowing more flexibility for buyers.
- Non-QM Loans Are Booming:
- Since condotels don’t qualify for conventional loans, non-QM loans (like bank statements or no-doc loans) have become more popular. These loans cater to self-employed borrowers or those with non-traditional income sources.
- Faster Closing Times:
- In 2024, numerous lenders offer condotel financing with closing times as fast as three weeks, enabling you to seize market opportunities.
How Did Condotels Come About?
Condotels became popular as a way for hotel companies to raise funds for construction. By selling off individual hotel rooms and suites to private owners, hotel companies could reduce construction costs while offering buyers luxury vacation homes. In exchange, buyers could rent unused units, creating a win-win scenario: the hotel raised funds, and the owners gained rental income. Over time, condotels became a lucrative real estate investment, especially in tourist-heavy areas.
The Pros and Cons of Owning a Condotel
Before diving into condotel ownership, it’s important to weigh the benefits and challenges:
Benefits of Condotel Ownership:
- Income Potential: You can rent out the unit when you’re not using it, potentially offsetting mortgage payments and other expenses.
- Low Maintenance: The hotel management handles rentals, maintenance, and guest services, making it a hands-off investment.
- Hotel Amenities: Enjoy all the perks of staying in a hotel, including room service, pools, spas, and fitness centers.
Challenges of Condotel Ownership:
- Financing: Condotel mortgages have stricter terms and higher interest rates than traditional mortgages.
- Rental Restrictions: Some hotels limit the number of days owners can stay in their units, and local laws may limit how many days you can rent them out.
- HOA Fees: Homeowners association fees can be high, and you may have to pay a portion of your rental income to the hotel management.
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Condotel Financing Mortgage Guidelines: The Process Step-by-Step
1. Get Pre-Qualified
To get condotel financing, you’ll need to start with pre-qualification. Sellers usually require a pre-qualification letter before considering offers. Lenders will look at your credit score, income, down payment, and reserves to determine your eligibility.
2. Condotel Financing Mortgage Guidelines by Portfolio Lenders: Hotel Approval
The condotel building itself must meet certain criteria:
- There are no pending lawsuits that could affect the financial health of the HOA.
- No more than 10% of units can be in foreclosure.
- Sufficient reserves in the HOA budget.
The Homeowners Association will complete a condo questionnaire to confirm these details.
3. Underwriting
Underwriting starts after the buyer and the condo hotel complex are approved. The underwriter will check your income, credit score, and assets to ensure you meet the lender’s condo mortgage guidelines.
Types of Loans for Condotel Financing: Mortgage Guidelines
Non-QM Loans are the most common option for condo financing in 2024. These loans are designed for borrowers who don’t fit the mold of conventional loan requirements. Here are a few popular non-QM loan options for condotels:
- Bank Statement Loans are ideal for self-employed borrowers who can’t show traditional W-2 income but can demonstrate cash flow through bank statements.
- No-Doc Loans: These require minimal documentation and are based on the property’s value and your down payment.
- Asset Depletion Loans: Lenders may consider your significant assets as a basis for income qualification.
What Are the Loan Terms for Condotel Financing Mortgage Guidelines?
Unlike standard home loans, condotel financing often comes with adjustable-rate mortgages (ARMs). You can choose from:
- 3/1 ARM: Fixed rate for the first 3 years, then adjusts annually.
- 5/1 ARM: The interest rate is set for the first 5 years and adjusted annually.
- 7/1 ARM: The interest rate remains constant for the initial 7 years and then changes yearly.
The adjustment rate is based on an index (usually the CMT) plus a margin. For example, if your starter rate is 4.5%, it won’t drop below that even if rates adjust lower. The maximum lifetime cap for rate increases is typically 6%. These loans are not balloon mortgages. Balloon mortgages expire at a certain time and must either be paid off in full or refinanced. Condotel unit owners do not have to worry about refinancing. Mortgage rates may adjust every year after the fixed-rate period is over.
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Condotel Financing Mortgage Guidelines on Investment Properties: What to Know
Knowing specific financing guidelines is important when purchasing a condotel as an investment. Typically, a minimum down payment of 40% is required, and the loan-to-value (LTV) ratio is capped at 60% for these properties. Additionally, interest rates for investment condotels are generally higher than those for primary or secondary residences.
Despite these factors, many investors are drawn to condotels due to their potential for high returns, particularly in popular tourist destinations.
Condotel Financing Mortgage Guidelines: Can You Refinance Your Condotel in 2025?
Good news—refinancing a condotel is back on the table in 2025. If you have an existing condotel loan with a high interest rate, you can refinance it into a lower-rate non-QM loan. Refinancing options include:
- Rate and Term Refinance: Lower your interest rate or change the loan terms (e.g., from ARM to fixed).
- Cash-Out Refinance: Tap into your condotel’s equity and use the cash for other investments or personal needs.
Like purchasing a condotel, refinancing requires a minimum credit score of 680, one year of reserves, and a maximum % debt-to-income ratio of 40%.
Condotel Financing Mortgage Guidelines
Discover 2025 condotel financing, mortgage guidelines, requirements, and loan options for condo-hotel properties. Learn how Gustan Cho Associates can help you qualify, even if other lenders said no.
What Is Condotel Financing?
Condotel financing refers to mortgage loans for condominium units in a building like a hotel. These properties are popular in vacation destinations, offering buyers both personal use and rental income potential. However, getting approved for condotel financing is not as straightforward as getting approved for traditional residential mortgages.
Why Condotels Are Considered Non-Warrantable
Understanding Non-Warrantable Properties
Most condotels are labeled non-warrantable by Fannie Mae and Freddie Mac because they don’t meet standard condominium requirements. Common reasons include:
- Daily or short-term rentals are allowed.
- The building has front-desk check-in and hotel services.
- A large percentage of units are investor-owned or used for rentals.
Because of these factors, conventional lenders with overlays often refuse condotel loans.
Typical Condotel Financing Mortgage Guidelines
Loan Program Options
- Portfolio and Non-QM Loans: The most common solution for condotels.
- DSCR Loans: Debt service coverage ratio loans can qualify borrowers based on property rental income instead of personal income.
- Cash-Out Refinance: Possible for borrowers looking to tap equity from condo units.
Down Payment Requirements
Most lenders require:
- 20% to 30% down payment for purchase loans.
- Higher equity for cash-out refinances.
Credit Score Guidelines
- Minimum credit score: 620–660 (varies by lender).
- Better terms with 680+ FICO.
How Debt-to-Income Ratios Are Viewed
Many condotel financing programs use flexible underwriting:
- Some lenders qualify strictly on DSCR rental income.
- Others use traditional DTI calculations but allow higher ratios, up to 50%.
Interest Rates and Loan Terms
Condotel mortgage rates are usually higher than conventional loans because of added risk. Borrowers can expect:
- Fixed-rate or adjustable-rate mortgages.
- Loan terms from 5/1 ARM to 30 years.
- Slightly higher closing costs.
Condotel Financing vs. Traditional Condo Loans
- Traditional Condos: Often eligible for Fannie Mae or Freddie Mac approval.
- Condotels: Require portfolio, Non-QM, or DSCR lenders with more flexible guidelines.
Common Challenges Borrowers Face
High Denial Rates With Big Banks
Banks and credit unions won’t finance condo hotels due to risk and strict overlays.
Appraisal Issues
Condotel appraisals can be tricky since comparable sales are limited.
HOA Considerations
Some lenders will carefully review the Homeowners Association (HOA) budget, reserves, and short-term rental policies.
How to Improve Your Chances of Approval
- Work with a specialized condotel lender with no overlays.
- Prepare two years of income and tax returns (unless using DSCR).
- Ensure your credit score is as strong as possible before applying.
- Understand HOA rules about rental restrictions.
Why Choose Gustan Cho Associates for Condotel Financing
At Gustan Cho Associates, we specialize in condotel loans nationwide. Unlike most lenders, we have:
- No lender overlays on condo mortgage guidelines.
- Access to Non-QM and DSCR loan programs.
- Experience closing loans that other banks deny.
Our team can help you buy a vacation property in Florida, California, Nevada, or anywhere in the U.S.
Ready to Buy or Refinance Your Condotel? We Can Help!
At Gustan Cho Associates, we specialize in condotel financing. We are here to help you secure the best mortgage for your situation. Whether you’re buying a primary vacation home or an investment property, we have options that work for you. Contact us today to start your condotel mortgage journey. Call 800-900-8569, text us for a quicker response, or email alex@gustancho.com. We’re available seven days a week, including evenings and holidays, to help you with all your mortgage needs!
Frequently Asked Questions About Condotel Financing Mortgage Guidelines
Can I Get a Conventional Loan For a Condotel?
- Not usually.
- Most condotels are non-warrantable and require portfolio, Non-QM, or DSCR loans.
What is The Minimum Down Payment For a Condotel?
- Expect 20%–30% depending on the lender and loan program.
Are Condo Rates Higher Than Traditional Mortgages?
- Yes, condotel mortgage rates are generally higher due to added risk.
Can I Use Rental Income to Qualify for a Condotel Loan?
- Yes, DSCR condotel loans allow qualification based on rental income.
Do I Need High Credit Scores For Condotel Financing?
- Most programs require at least 620–660, with better rates for higher scores.
Are Cash-Out Refinances Available For Condos?
- Yes, some lenders allow cash-out refinances if you have enough equity.
Do Big Banks Offer Condotel Financing?
- Rarely.
- Most condotel borrowers work with non-QM or portfolio lenders.
Can Foreign Nationals Qualify For Condotel Financing?
- Yes, some condotel loan programs allow foreign nationals to qualify.
What States Allow Condotel Financing?
- Condotel loans are available nationwide, especially in vacation hotspots like Florida, Nevada, and Hawaii.
Why Should I Use Gustan Cho Associates For Condotel Financing?
- We close condotel loans that other lenders can’t, with no overlays and nationwide coverage.
What is a Condo Hotel?
- A condotel or condo hotel is a condo unit within a hotel. You can own and rent the unit when you’re not using it.
- The hotel manages rentals and maintenance, making it a hands-off investment.
How Do I Qualify For Condotel Financing Mortgage Guidelines?
- To qualify, you need a credit score of at least 680, a 25-40% down payment, and one year of reserves.
- The exact terms depend on whether the condotel is your primary residence, second home, or investment property.
Can I Get a Mortgage For a Condo Hotel in 2025?
- You can get a non-QM or portfolio loan for condo hotels.
- Traditional mortgages don’t apply because condotels are classified as non-warrantable condos.
What is The Minimum Down Payment on Condotel Financing Mortgage Guidelines?
- The minimum down payment for primary or second homes is 25%.
- For investment condotels, you’ll need at least 40% down.
What is The Difference Between Condotel Financing Mortgage Guidelines and Regular Condo Loans?
- Financing for condotels is categorized as non-QM loans, featuring elevated interest rates and more stringent requirements.
- Conversely, typical condo loans frequently meet Fannie Mae or Freddie Mac financing criteria.
What Are The Terms of Condotel Financing Mortgage Guidelines?
- Condotel loans are usually adjustable-rate mortgages (ARMs).
- You can choose from a 3/1, 5/1, or 7/1 ARM, meaning the interest rate is fixed for the first few years and then adjusts annually.
Are There Restrictions on Using Condotel Units?
- Some hotels limit the time you can stay in your unit each year. Local laws may also restrict the number of days you can rent it out, so check these details before buying.
Can I Refinance My Condotel in 2025?
- Yes, refinancing is possible.
- You can lower your interest rate or take cash out based on your company’s equity.
- The requirements for refinancing are similar to purchasing, including a credit score 680 and one year of reserves.
What Are Condotel Financing Mortgage Guidelines for Investors?
- For investors, the loan-to-value (LTV) ratio is capped at 60%, and the minimum down payment is 40%.
- Investment properties also have higher interest rates than primary residences.
How Can I Get Started With Condotel Financing?
- Start by getting pre-qualified with a lender specializing in condotel financing and mortgage guidelines.
- They’ll review your credit, down payment, and financial situation to help you find the right loan program.
This blog about “Condotel Financing Mortgage Guidelines” was updated on September 15th, 2025.
