Condotel Mortgage Loans
Condotel mortgage loans Financing Guidelines are a little different that conventional mortgage loans and FHA lending guidelines. Condotel mortgage loans are not sold to Fannie Mae or Freddie Mac. Condotel mortgage loans are portfolio loans that are normally held by the portfolio lender for the duration of the loan. The interest rate is slightly higher on Condotel mortgage loans compared to conventional loans and FHA mortgage loans.
Reserve Requirements on Condotel Mortgage Loans
Condotel mortgage lenders normally require the Condotel mortgage loan borrower that they have at least one year reserves of principal, interest, taxes, insurance, and homeowners association dues for the subject Condotel mortgage loan and any and all other properties the borrower owns. The reserves do not have to be in cash. The first three months of principal,interest,taxes,insurance, and homeowners association dues need to be in cash but the rest of the reserves can be in stocks, bonds, and retirement funds. They do not require an escrow but they do require that you show the reserves during underwriting.
Enforcement or Escrows on Reserves after Closing
The Condo Hotel Mortgage Lender will not be enforcing the reserve requirement after closing your Condotel mortgage loan but it is recommended that you do have reserves in the event if the Condotel rental market softens and you do have access to reserves.
As an example, if you have a primary owner occupied single family residence in Illinois and your monthly mortgage payment with taxes and insurance is $1,000 per month and the Condotel mortgage payment with property taxes, insurance, and homeowner association is $1,000 per month, you will need one year’s worth of reserves for you primary residence of $12,000 as well as $12,000 worth of the new Condotel mortgage loan reserves. The Condo Hotel Mortgage Lender would need to see that you have a total of $24,000 in liquid assets of which $3,000, possibly $6,000, have to be in cash. As stated earlier, the Condo Hotel Mortgage Lender wants to see 3 months of the Condo Hotel mortgage payment in cash at least for the subject property. For those borrowers with questionable credit scores, the Condo Hotel Mortgage Lender might prefer to see the 3 month cash reserve requirement for both properties. The balance can be in stocks, bonds, IRA, retirement funds, and other liquid securities like annuities.
Are Condotel Mortgage Loans Reserves Escrowed?
The good news is that the reserves are not escrowed or enforced after you close on your Condotel. So in case of an emergency, you will have access to those funds. If you have any questions on Condotel mortgage loans, feel free to contact me at www.gustancho.com . I am available 7 days a week and your calls or emails will always be returned. You can apply online here at www.gustancho.com for Condotel mortgage loans by clicking on the APPLY NOW icon on the top right section of the website. Once you submit your online mortgage application, I will issue you a preapproval.
This mortgage blog article post on Condotel Mortgage Loans has been updated on May 6, 2015.