Wanting info on DSCR loan for a condo?

Question

Wanting to know if they have any DSCR lenders that will loan on a condo. I’m not purchasing both units just one of the two?

River Sava · Answer

Not silly at all, can be confusing! I actually just posted a breakdown about this as it is a common question. Below is a high level explanation. I sent you a dm to connect if you have further questions!Warrantable Condos:Approved by GSE Agencies (Fannie Mae/Freddie Mac), they follow a complex checklist. Key determinants include the percentage of owner-occupied units, contribution percentage for the HOA budget towards reserves, and a clean record without litigation, delinquencies, or major issues. Non-Warrantable Condos: Non-warrantable condos don't meet the stringent requirements set by GSE Agencies. Maybe they have a lower percentage of owner-occupied units, insufficient contribution to reserves, or some lingering issues. It's like the rebel of the condo world – doesn't play by all the rules!

Colin McMahon · Answer

ALL great advice and information provided above! Here’s a bit of a synopsis: DSCRs and condos go hand in hand Anything under 5 units will still be treated as residential single-family in terms of terms, rates, etc. Before submitting an offer, contact the Condo association to understand whether the property is non-warrantable (will require Non-QM financing) or warrantable (Approved by Fannie/Freddie) as that will impact the rates and terms you’ll qualify for Lenders consider all costs when calculating your DSCR so get a head start by asking the association for HOA fees as this can really impact your ratio. In strong rental markets, do not worry too much as there are lenders who will finance your loan even if your DSCR is under 1 (but for best terms - aim for 1+) Typical LTV will be around a 70 - 75%. Anything higher and you’re likely looking at less than optimal terms/rates

Patrick Roberts · Answer

Warrantable condos can get traditional financing, such as Conventional loans. Nonwarrantable condos will have to have nonQM financing (which is usually more expensive). In some cases, you may not be able to finance the unit at all. The condominium project itself has to be evaluated, not simply the individual unit.

Andrew Zamboroski · Answer

As others have said, almost all DSCR loans offer loans for warrantable condos. However, there is often flexibility for non warrantable ones too (depending on the reason). Certain lenders may reduce ltv for the added risk of it being non warrantable.

Robin Simon · Answer

would just add that recently theres been a further split in non-warrantable condos to a new classification for condo units that are specifically made for short term rentals - "Condotels" - which will typically have their own requirement box

Brittany Minocchi · Answer

Yes, you can get fianancing on condos with conventional and nonQM loan types. Biggest thing is whether or not it's warrantable as others have mentioned, or if it's a condotel. Doesn't sound like a condotel if it's a small building. Happy to discuss if you have any questions, feel free to reach out.

Katie Smith · Answer

Hi Wayne! You can attempt to reach out to the HOA to see if they know if it's warrantable or non-warrantable. More times than not, they will not know but this is what the lender questionnaire is for. You can have it quoted as non-warrantable and if it comes back as warrantable, the interest rate and monthly payment will decrease a bit! DSCR is the way to go for investment properties regardless. Just find a lender that can help you in both scenarios! Happy to help!

AJ Exner · Answer

Hey Wayne,In the DSCR space, most lenders would treat 3 units (2-4 unit) within the same classification as a 'Single Family' DSCR with maybe a small increase in rate, but your leverage options should be about the same (20% down).

Brittany Minocchi · Answer

Anything 1-4 units is considered residential, once you get into 5+ units THEN you're in the commercial space. There are multiple lenders that will allow 80% LTV on a DSCR purchase of a triplex. You'll see a jump in rate from 75%, so just make sure your numbers still pencil out. I'm not sure of your FICO, loan amount, etc...but I'd expect the difference in rate between 75% and 80% LTV to be around 0.5-1.0%. Feel free to reach out, happy to help if you have any other questions.

Wayne Doucet · Answer

Great advice thank you.