Condotel Financing Requirements And Mortgage Guidelines

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Condotel Financing Requirements And Mortgage Guidelines

This BLOG On Condotel Financing Requirements And Mortgage Guidelines Was UPDATED On July 19, 2018

Condotel Financing Requirements

Condotel Financing Requirements have gotten much easier for this calendar year due to the many inquiries and demand of these types of loans.

  • A condotel unit is a condominium unit within a hotel or a condominium complex that has a rental desk
  • The HOA rents the condotel units when the condotel unit owner does not occupy it
  • The condotel unit is managed by the hotel homeowners association or condo complex homeowners association
  • In lieu of managing and renting the condotel unit, the homeowners association takes a percentage of the rental revenues
  • The percentage, or commission, the homeowners association takes depends on what they charge
  • Normally a 40% to 50% split is not uncommon
  • Unit owners do not have to use the condo homeowners association to rent out their units
  • They can rent them out themselves and keep all of the gross revenues from their rental units

Condotel Financing Requirements On Down Payment And Credit Guidelines

Down payment requirements differs for condotel units and non-warrantable condominium units.

  • A condotel is a non-warrantable condominium as well
  • However, the difference between the two is that a condotel has a rental desk
  • It is inside a hotel complex and/or a condo complex with a rental desk where daily and weekly rentals are allowed
  • A non-warrantable condominium complex can be no different than any other condominium complex
  • It does not have a rental desk
  • More than 51% of the condominium owners are investors and non-occupant owners 
  • To be considered a warrantable condominium complex, 51% or more of the condominium unit owners need to be owner occupants
  • Warrantable condominium financing can be done with Fannie Mae and Freddie Mac conforming loans
  • Only portfolio lenders can do non-warrantable condominium financing
  • All condotel and non-warrantable loans are 30 year adjustable rate mortgages portfolio loans
  • They are available as 3/1 ARM, 5/1 ARM, and 7/1 ARM

Second Home Versus Investment Condotel Financing Requirements

For owner occupant or second home condotel financing, 25% down payment is required for condotel financing. The difference between owner occupant and/or second home financing or investment home financing are as follows:

  • Here is a case scenario:
    • If the condotel unit buyer is buying the condotel unit
    • has one other primary residence
    • the proposed condotel unit purchase is their second property
    • then the condotel unit buyer can qualify for a second home and/or vacation home condotel financing
  • If the condotel unit buyer has no other property and purchase is their first property, then it can be classified as their primary property
  • Primary and second home condotel financing requires 25% down payment
  • If the condotel unit buyer has more than 2 or more properties and the purchase will be their third property, then the condotel financing will fall into investment home financing category
  • With investment condotel financing, 40% down payment is required
  • Mortgage interest rates will be higher than primary home and/or second home condotel financing

Building And Condo Unit Requirements

The condotel unit needs to be at least 500 square feet, have at least one bedroom, and cannot be under any major litigation or in any stage of a bankruptcy.

  • The condotel project needs to have sufficient reserves and in great condition
  • Minimum loan size is $100,000 and there is no maximum loan size
  • Condotel refinance loans require a maximum of 75% loan to value
  • This is whether it is rate and term refinancing or cash out refinance mortgage loans

Down Payment Requirements on non-warrantable condominium financing is 20% down payment. If interested in condotel and/or non-warrantable condominium financing, please contact us at Gustan Cho Associates at 262-716-8151 or email us your questions at gcho@gustancho.com. Borrowers can text us for faster response.

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