Condo Hotel vs Non-Warrantable Condo: Financing Differences

Borrowers often conflate condo hotels with non-warrantable condos. Both lack conventional financing, but for different reasons and with different non-QM solutions.

What Makes a Project a Condo Hotel

A condo hotel is ineligible for agency financing when the project has a hotel registration desk or front desk check-in, units are part of a mandatory rental pool or management program that restricts owner use, or the project is advertised as a short-term rental investment. Fannie Mae and Freddie Mac will not purchase loans on true condo hotel units regardless of borrower credit. This is not an overlay issue; it is a project ineligibility issue.

What Makes a Condo Non-Warrantable

• ✦Single entity owns more than 20% of total units (10% for projects with 20 or fewer units on Fannie Mae)
• ✦More than 35% of units are investor-owned for Fannie Mae full review projects
• ✦HOA has significant delinquencies: more than 15% of owners 60-plus days late on dues
• ✦Pending special assessment that is material relative to per-unit value
• ✦Active or unresolved litigation involving the HOA
• ✦New construction project without presale thresholds met

Non-QM Financing for Each Scenario

Condo hotel financing requires a non-QM lender that explicitly allows hotel-style projects. Expect FICO floors around 680 to 700, LTV caps at 70% to 75%, and DSCR-based underwriting using projected short-term rental income rather than traditional DTI. Non-warrantable condos can still go conventional at some portfolio lenders, but most move to non-QM. Portfolio lenders like Deephaven and Angel Oak will underwrite non-warrantable condos with standard income documentation, FICO down to 660, and LTV up to 80% on primary occupancy.