Condotel Loans Application Process

I am getting many calls from condotel buyers who have purchased condotel units and have gone through the application process with larger banks but at the end when they were about to close, the bank’s underwriter has denied the condotel loan.  These are not local neighborhood banks but larger banks like Wells Fargo, Chase, and Bank of America.  Cases like these happen often and when it does, it leaves the condotel unit buyer in a serious dilemma and can jeapordize their earnest money and fees that the condotel buyer has already invested such as appraisal fees and other costs.

Condotel Loans And Non Warrantable Condo Financing Are Portfolio Loans

Most banks and residential mortgage lenders do not process and underwrite condotel loans and non warrantable condo financing.  When you apply for condotel loans and non warrantable condo financing, you need to make sure the mortgage loan officer, whether a banker, mortgage banker, or mortgage broker, that the subject condominium is a condotel unit and/or a non warrantable condo.  Most mortgage loan originators should ask you about the condominium complex as well as whether it is a warrantable or non warrantable condo.  Unfortunately,  some mortgage loan originators accept the mortgage application thinking that their lending institution would have no problem financing the subject condominium.  I have had situations where the condotel mortgage application even progressed after the lender getting the appraisal but eventually was denied just a week prior to closing where the lender’s Quality Control department denied the loan when everyone was expecting a clear to close.  Situations like these is unfortunate for everyone and most banks will not make any exception and will just send the borrower away.  The right thing to do would be for the bank to do the loan as a portfolio loan for the condotel mortgage loan borrower but to this date, I have not yet seen such offer.

Condotel Loans: If Denied By Other Lenders

If you have gotten denied for condotel loans by another mortgage lender,  please contact me at 262-716-8151 or at www.gustancho.com .  I can possibly help you and see if I can close your condotel purchase loan in less than two weeks.  Here are the condotel mortgage requirements:

1.  Minimum credit score of borrower 680 FICO and maximum back end debt to income ratio cannot exceed 40% with primary and condotel unit combined.

2.  Condotel unit needs to have at least one bedroom and kitchen and needs to be at least 500 square feet.

3.  75% loan to value for primary, vacation, and second condotel loans: Purchase and refinance.  60% loan to value for investment condotel loans.  Need one year reserves for both primary and condotel unit mortgage payments in cash or liquid assets such as securities, retirement, or other assets.

4.  Condotel project needs to be financially and structurally stable with no major pending litigation nor serious building code violations.

5.  Condotel loans and non warrantable condo financing are 30 year adjustable rate mortgage portfolio loans: 3/1 ARM, 5/1 ARM, 7/1 ARM:  Index is based on one year treasuries ( Cost Maturity Treasury ) plus 3.0% MARGIN.  After the initial fixed rate period, the new rate cannot be lower than the starter rate.  Starter rate as of 01/03/2014 is 5.0% plus adjustments for condotel borrower.

6.  Condotel loans are underwritten and approved within 48 hours from the borrower submits all signed mortgage application, disclosures, and mortgage documents such as tax returns, W-2s, bank statements, and other requested paperwork.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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