Condotel And Non Warrantable Condo Loans

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Condotel And Non Warrantable Condo Loans

This BLOG On Condotel And Non Warrantable Condo Loans Was UPDATED On October 29th, 2018

Non-Warrantable Condos are condominiums that belong to a condominium complex where 51% or more of the units are owned by investors. A non-warrantable condominium is a regular condominium in a condo complex but 51% or more of the unit owners are non-occupant unit owners. Fannie Mae and/or Freddie Mac will not purchase any loans from a non-warrantable condo complex. A warrantable condominium complex can become a non-warrantable condo. On the flip side a non-warrantable condo can become a warrantable condo depending on the 51% rule.

  • If a condominium building or complex consists of its units occupied by 50% or more by tenants, it is considered a non warrantable condominium
  • Non warrantable condo loans are portfolio loans
  • Portfolio loans are mortgages that are held by the lender in their investment portfolio
  • Portfolio loans are not sold to the secondary market like conforming loans

Non Warrantable Condo Loans Very Popular

Non warrantable condo loans are becoming more popular than ever, especially in Florida, California, and Illinois.

  • Second home buyers like the fact that they can purchase a non warrantable condominium and condotel units by the ocean
  • The like to occupy it several months out of the year and be able to rent it out when they are not using it
  • Many non warrantable condominium owners hire a property management company to manage their non warrantable condos
  • Using it personally as well as renting it while it is not in use by the homeowner offers great benefits
  • Most non warrantable condo property managers take a percentage of the rental income as their fees

Non Warrantable Condos And Condotels As Investment Properties

A large percentage of condotel and non warrantable condo homeowners rent their condos on a short term basis to maximize the income. A condotel is a condominium unit in a hotel complex. Both condotels and non-warrantable condos can be used as primary homes, second homes, and investment income producing properties.

  • They might charge $1,000 for a week rental to a tourist versus a $1,000 per month to a long term tenant. 
  • Other lease programs include weekend rentals, monthly rentals, quarterly rentals, and semi annual rentals
  • Other homeowners just occupy their non warrantable condos as their primary residences

Mortgage Rates and Terms on Non Warrantable Condo Loans and Condotel Financing

Non warrantable condo loans mortgage rates are slightly higher than a warrantable condo mortgage loans.

  • Most non warrantable condo loans are adjustable rate mortgages, 7/1 ARM. 5/1 ARM, 3/1 ARM
  • Most portfolio loans are adjustable rate mortgages
  • This holds true since lenders not want the risk of being obligated to an interest rate for 30 years
  • This is since they are holding the mortgage in their investment portfolio
  • Borrowers need a minimum of 680 credit scores
  • 25% down payment is required on condotel financing
  • 20% down payment is required on non-warrantable condo financing
  • Minimum loan amount is $100,000 and no maximum loan amounts
  • Minimum condo size is 500 square feet
  • Condotels and Non-Warrantable condos need to have at least one bedroom and a full functional kitchen

Condotel and/or Non-Warrantable Condominium buyers interested in non warrantable condo loans or condotel financing can call us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at gcho@gustancho.com.

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