Condotel And Non-Warrantable Condo Loans


This BLOG On Condotel And Non-Warrantable Condo Loans Was UPDATED On And PUBLISHED On February 23rd, 2020

Why Condotel and loans are not covered by the warranty

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

In this article, we will discuss and cover condotel versus non-warrantable condo financing guidelines.

Warrantable Versus Non-Warrantable Condominiums

  • 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

What are the loans that are not covered by the guarantee? 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 And Condotel Financing

What is the mortgage interest rate and financing conditions not subject to Condotel's guarantee and financing

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

  • Most non-warrantable condominium 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 do 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
  • The 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 fully 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

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