Condotel vs Non-Warrantable Condo Financing

In this article, we will cover and discuss condotel vs non-warrantable condo financing. Condotels used to be extremely popular in the early and mid-2000s in Florida and other vacation hot spots like California, Hawaii, Colorado, Mississippi, Kentucky, Texas, Georgia, Ohio, Alabama, Kansas, Utah, Arizona, Nevada, and Chicago. However, after condo-hotel loans came to an abrupt halt by major banks. Big banks such as JP Morgan Chase, Wells Fargo, Citibank, and Bank of America, Condo Hotel purchases came to an abrupt halt in financing condotel units after the 2008 Great Recession.

Condotel vs Non-Warrantable Condo Mortgage Loans After 2008 Financial Crisis

Condotel purchases were just limited to cash Condo-Hotel unit buyers since Condo Hotel loans were not available by any lenders. Even portfolio lenders did not want anything to do with them. For those Condo-Hotel unit owners who got financing prior to the 2008 real estate and credit meltdown, they were pretty much stuck with the rates they had and had no refinance option.

How Big Banks Halted Originating Condo-Hotel Unit Mortgage Loans After 2008 Real Estate Crisis

Condotel mortgage lenders such as Chase, Wells Fargo, Citibank, and Bank of America would not refinance their existing Condo-Hotel unit mortgage loans. These banks will not make exceptions on refinancing their current condotel borrowers even when they had premier bank clients and their clients were never late in paying their Condo-Hotel unit mortgage loans. The good news is Mortgage Lenders for Bad Credit offers Condo-Hotel unit mortgage loans at competitive rates. Condotel and non-warrantable condo units are becoming increasingly popular in Florida and other parts of the country.

• Condotel and non-warrantable condo mortgage loans are now available for primary, second/vacation homes, and investment homes mortgage loan programs
• Condotel and non-warrantable condo mortgage loans lenders are portfolio lenders
• Portfolio lenders hold the condotel and non-warrantable condo mortgage loan in their books and not sell the loan to the secondary market
• To qualify for our condotel and non-warrantable condo mortgage loan program, the unit needs to have at least one bedroom and a full sized kitchen
• The condo hotel complex needs to be financially sound with no more than 10% of the units under foreclosure
• Condotel homeowners association needs to have sufficient reserves
• Condo Hotel projects that are on the verge of bankruptcy or has many structural issues and outstanding building violations would not qualify for condotel and non-warrantable condo mortgage loan programs

In this article, we will discuss and cover Condotel And Non-Warrantable Condo Mortgage Loans.

Borrower Qualification Requirements For Condotel vs non-warrantable Condo financing

Condotel vs non-warrantable condo financing have their own mortgage lending guidelines and are pretty strict.

• Borrowers need to have a minimum credit score of 680 FICO
• Not have had a bankruptcy, foreclosure, deed in lieu of foreclosure, or short sale in the past 7 years
• The borrower cannot exceed a debt to income ratio of 45%
• This includes the borrower’s current housing expenses as well as the new condotel mortgage loan and housing expenses
• The borrower needs to have at least one year’s of reserves for both their primary residence as well as the new condotel unit purchase
• Reserves do not have to be in cash
• Only three months of reserves need to be in cash the balance can be in investment funds, IRA’s, or retirement accounts

Borrowers need to put a 25% down payment for primary residence and/or second/vacation homes condotel and non-warrantable mortgage loans.

Condotel vs Non-Warrantable Condo Mortgage Loan Process

To qualify condotel and non-warrantable mortgage loans, the first step is to have a condo-hotel complex homeowners association manager complete a one-page condominium questionnaire.

• The completed questionnaire is then submitted to the underwriting department for review
• Need to check if the condo hotel complex is in sound financial status
• There cannot be building violations and/or pending litigation in the pipeline
• Within 24 hours, the condo hotel project can get an approval
• This means the next step is to process the loan application

Starting Pre-Approval Process on condotel vs non-warrantable condo loans

Borrowers can complete the 4-page mortgage application and submit financials such as the following:

• Two years of tax returns
• Two years W-2s
• 60 days bank statements
• Recent paycheck stubs, and other documents that the mortgage loan originator requests
• Once all the docs and the signed mortgage application is in the hands of the lender, the application will be processed and submitted to the underwriting department
• When the underwriter issues an approval, the file then goes to a credit committee which will most likely approval the condotel mortgage application
• The appraisal is then ordered and the borrower will get a conditional loan approval

Once all the conditions have been met and the appraisal is valued at the purchase price amount, the lender will issue a clear to close.  A clear to close is issued when the mortgage lender is ready to fund.

Types Of Condotel vs non-warrantable condo Mortgage Loans

For those who are seeking purchase and/or refinance Condo-Hotel unit mortgage loans, Gustan Cho Associates has condotel financing programs:

• 75% loan to value adjustment rate mortgage loans
• 30-year loan programs: 3/1  ARM, 5/1 ARM, and 7/1 ARM amortized over 30 years
• The index is based on the one-year treasuries ( Cost Maturity Treasuries CMT ) with a margin of 3%
• The adjustment rate cannot be lower than the starter rate
• The Condotel unit needs to be at least 500 square feet and needs to be at least a one-bedroom condotel unit with a functional kitchen
• The Condo Hotel project needs to be in good financial standing as well as in good condition with no pending major litigation or building violations

difference between condotel vs Non-Warrantable Condo Financing

Any condominium complex that has 51% or more of the units that are owned by investors is considered a non-warrantable condo complex. Fannie Mae and Freddie Mac will not purchase any non-warrantable condo loans. Gustan Cho Associates offers financing for non-warrantable condominiums. Here are the basic requirements:

• 20% down payment on first and second homes
• 40% down payment on investment home loans
• 30-year loans but adjustable-rate mortgages: 3/1 ARM, 5/1 ARM, 7/1 ARMS
• The condo unit needs to be at least 500 square feet
• At least one bedroom and functional full kitchen: No Studios
• 680 Credit Scores

Guidelines On condotel vs Non-Warrantable Condominium Mortgages

There is no cap on investor concentrations on non-warrantable condominium mortgages.

• On home purchase and refinance non-warrantable condominium mortgages, as long as they are second or vacation homes, minimum loan to value caps are at 80% LTV
• On cash-out refinance non-warrantable condominium mortgages, the loan to value reduces to a 75% loan to value cap
• A single person or entity on the non-warrantable condominium unit is allowed to own 10% or more of the condominium units
• Minimum credit scores for the non-warrantable condominium mortgage loan borrower cannot be lower than a 680 credit score
• Foreign Nationals can qualify for Condotel and Non-Warrantable Condominium mortgages
• Our Foreign Nationals Loan Program requires they have a valid work visa and have employment in the United States through the work visa
• No credit scores are required

Condotel vs Non-Warrantable Condo Mortgages With Portfolio Loan Program

All Condotel and Non-Warrantable Condominium Mortgages are 30-year ADJUSTABLE RATE MORTGAGES, also referred to as an ARM.

• The index is based on the one year Cost Maturity Treasuries, also commonly known as the CMT
• The margin is fixed at 3.0%

The adjustable-rate mortgages offered are:

• 3/1 ARM
• 5/1 ARM
• 7/1 ARM

Starter rates are in the 5.0% to 6.0% range:

• Mortgage Rates cannot be lower than the starter rate when the fixed-rate ARM period is over and the adjustment period starts
• The non-warrantable condominium building cannot be under serious litigation
• Cannot have structural issues or building violation
• HOA needs to have ample reserves
• Cannot have more than 10% of the units in foreclosure
• The individual condominium unit needs to be at least 500 square feet
• Needs to have a full-size functional kitchen and at least one bedroom
• Minimum mortgage loan size is $150,000
• There is no maximum mortgage loan size
• The borrower needs to have at least one year reserve for the principal residence, the subject purchase property as well as any other investment properties
• Reserves do not have to be in cash

Retirement funds and other liquidable securities can be used for reserve requirements.

Minimum Borrowers Qualifications on condotel vs non-warrantable condo mortgage loans

Condo Hotel Unit Borrowers need to have a minimum credit score of 680 FICO with no late payments in the past 12 months and no bank overdrafts in the past 12 months. The maximum debt to income ratio requirement is no greater than 40%. However, we can be creative when it comes to qualifying income. We can use our asset depletion program where we can calculate additional income from the borrower’s asset which can include retirement funds, investment accounts, and real estate holdings.

Condotel vs non-warrantable condo Mortgage Process

If the Condotel unit borrower owns other investment properties, we can use real estate depreciation as additional income. Condo Hotel Unit Mortgage Loans are underwritten within 24 hours of receiving all documents and the signed mortgage application. Most Condo-Hotel Unit Mortgage Loans are closed within 21 days of receiving the signed mortgage application and necessary paperwork. Paperwork required are documents such as 2 years of tax returns, recent paycheck stubs, and two months’ bank statements. Condotel Unit buyers interested in getting qualified for Condotel Financing, please contact Mortgage Lenders for Bad Credit at 800-900-8569 or text us for a faster response. Borrowers can also email us at gcho@gustancho.com. The team at Mortgage Lenders for Bad Credit is available 7 days a week: evenings, weekends, holidays as well.