DSCR Loans for Non-Warrantable Condos
Conventional lenders won't touch a non-warrantable condo — DSCR loans often will.
By Ryan Kennedy, NMLS #1434300 · Orlando Mortgage Broker, Icon Mortgage Group
Conventional lenders won't touch a non-warrantable condo — DSCR loans often will.
By Ryan Kennedy, NMLS #1434300 · Orlando Mortgage Broker, Icon Mortgage Group
If you've found a great investment condo only to be told it's "non-warrantable" and your conventional pre-approval won't work, DSCR financing is usually the path forward.
Fannie Mae and Freddie Mac set eligibility rules ("warrantability") for condo projects covering things like the percentage of units that are owner-occupied vs. investor-owned, the percentage of unsold units still held by the developer, litigation involving the HOA, commercial space within the building, and the condo association's reserve funding. A project failing any of these tests is considered non-warrantable, which blocks standard conventional condo financing.
Many Orlando-area vacation condo and resort-style projects have a high percentage of investor-owned units by design — since they were built for the vacation rental market — which is one of the most common reasons they end up classified as non-warrantable.
Because DSCR loans are held by private/non-agency lenders rather than sold to Fannie Mae or Freddie Mac, they aren't bound by warrantability rules. DSCR lenders set their own condo project review standards, which are typically more flexible, though they'll still evaluate the building's financials and litigation status.
Down payment requirements and pricing on non-warrantable condo DSCR loans are often somewhat higher than on a warrantable condo or single-family home, reflecting the added project-level risk.
It's worth checking a condo project's warrantability status early — before you're deep into a contract — so you know which financing path applies and can plan your down payment and closing timeline accordingly.