Condotel and Non-Warrantable Condo Loans Explained
- By Jim Blackburn
- on
- Tags: Blog Posts for - Emails 1-10
Not all condos are created equal—and not all are eligible for traditional financing.
If you’re looking at a condotel, resort unit, or a condo with too many short-term rentals or investor-owned units, you may be told it’s “non-warrantable.” That’s not a deal-breaker. It just means you need a specialized loan designed for these unique properties.
What Is a Non-Warrantable Condo?
A condo is considered non-warrantable if it doesn’t meet conventional lending guidelines from Fannie Mae or Freddie Mac.
Common reasons include:
- Too many units used as short-term rentals or Airbnbs
- One investor owns more than 10% of the units
- High percentage of non-owner-occupied units
- Incomplete construction or pending litigation
- Low budget reserves or deferred maintenance
What Is a Condotel?
A condotel is a condo located in a building that functions like a hotel. It often includes:
- A front desk or concierge
- Housekeeping services
- On-site rental management
- Nightly or weekly guest rentals
Traditional lenders see this as a commercial risk, so they decline financing—even when the unit is individually owned.
Loan Options for Non-Warrantable Condos and Condotels
This is where portfolio and non-QM loans step in.
Available programs may include:
- Bank statement or stated income loans
- Asset-based qualification options
- Interest-only or adjustable-rate terms
- Down payment requirements as low as 15–25%
- Available for primary, secondary, or investment use
These loans are manually underwritten by lenders that specialize in unique condo projects.
Who Buys These Properties?
- Investors looking for cash-flowing short-term rentals
- Buyers wanting a vacation home that can also earn income
- Retirees downsizing into a low-maintenance lifestyle
- Entrepreneurs entering the hospitality or rental business
Strategy: Know Before You Go Under Contract
Many buyers fall in love with a property, make an offer, and only then find out it’s non-warrantable. That’s when deals fall apart.
The smarter approach: work with a lender upfront who can verify the building’s status and offer loan options based on it.
Want to Know If Your Property Qualifies?
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