Wanting info on DSCR loan for a condo?

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River SavaPro Member
Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
2y
Quote from @Wayne Doucet:
Quote from @David Bilandzija:

@Wayne Doucet Absolutely. Condos are eligible properties for DSCR programs. You'll want to find out in advance if the property is a warrantable or non-warrantable.

Question might sound silly. But what are meaning by warrantable or no warrantable?
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!
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  • David Bilandzija
    Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
    2y

    @Wayne Doucet Absolutely. Condos are eligible properties for DSCR programs. You'll want to find out in advance if the property is a warrantable or non-warrantable.

    0Reply
  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 656 posts · 318 votes
    2y
    Quote from @Wayne Doucet:

    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?

    Wayne, 

    You'll also have to take into account the monthly HOA dues into the DSCR calculation. Many lenders will lend to either warrantable or non-warrantable condos, but HOAs can be the real DSCR killer if you're not careful.

    [email protected]417-427-2612
    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    2y
    Quote from @Wayne Doucet:

    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?


    Yes you can finance a individual condo with a DSCR loan as long as they are both separate properties.

    [email protected]818-269-7983
    LuxePrivate Investments LLC 572 Reviews
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    1Reply
  • Wayne Doucet
    OP
    Member since 2024 · 9 posts · 9 votes
    2y
    Quote from @David Bilandzija:

    @Wayne Doucet Absolutely. Condos are eligible properties for DSCR programs. You'll want to find out in advance if the property is a warrantable or non-warrantable.

    Question might sound silly. But what are meaning by warrantable or no warrantable?
    1Reply
  • River SavaPro Member
    Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
    2y
    Quote from @Wayne Doucet:
    Quote from @David Bilandzija:

    @Wayne Doucet Absolutely. Condos are eligible properties for DSCR programs. You'll want to find out in advance if the property is a warrantable or non-warrantable.

    Question might sound silly. But what are meaning by warrantable or no warrantable?
    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!
    [email protected]
    3Reply
  • Patrick Roberts
    Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Wayne Doucet:
    Quote from @David Bilandzija:

    @Wayne Doucet Absolutely. Condos are eligible properties for DSCR programs. You'll want to find out in advance if the property is a warrantable or non-warrantable.

    Question might sound silly. But what are meaning by warrantable or no warrantable?

     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. 

    2Reply
  • Andrew Zamboroski
    Lender · Member since 2021 · 495 posts · 131 votes
    2y
    Quote from @Wayne Doucet:

    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?

    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.
    2Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    2y

    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

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    2Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y

    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. 

    [email protected]330-354-6590
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  • Katie Smith
    Member since 2023 · 348 posts · 190 votes
    2y

    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!

    2Reply
  • Wayne Doucet
    OP
    Member since 2024 · 9 posts · 9 votes
    2y

    Thanks for all the great advice. I know we have been talking about DSCR stuff I am also looking at a property with 3 units on it. This would fall under more of the commercial loan side. I have one lender that is wanting 25% down that is local. Is there any other lenders out there that will do 20%?

    0Reply
  • Patrick Roberts
    Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
    2y
    Quote from @Wayne Doucet:

    Thanks for all the great advice. I know we have been talking about DSCR stuff I am also looking at a property with 3 units on it. This would fall under more of the commercial loan side. I have one lender that is wanting 25% down that is local. Is there any other lenders out there that will do 20%?

    There are some investors that will allow 80% LTV, but pricing on those loans will likely be horrible. Most lenders/investors are wanting a margin of safety in investment loans given where the economy and RE cycle are at. I would expect to stay at/below 75% LTV for pricing to be reasonable or near market.
    1Reply
  • AJ ExnerPro Member
    Lender · Springfield, MO · Member since 2023 · 656 posts · 318 votes
    2y
    Quote from @Wayne Doucet:

    Thanks for all the great advice. I know we have been talking about DSCR stuff I am also looking at a property with 3 units on it. This would fall under more of the commercial loan side. I have one lender that is wanting 25% down that is local. Is there any other lenders out there that will do 20%?


    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).

    [email protected]417-427-2612
    2Reply
  • Brittany MinocchiBusiness Member
    Lender · Massillon, OH · Member since 2022 · 1k+ posts · 486 votes
    2y
    Quote from @Wayne Doucet:

    Thanks for all the great advice. I know we have been talking about DSCR stuff I am also looking at a property with 3 units on it. This would fall under more of the commercial loan side. I have one lender that is wanting 25% down that is local. Is there any other lenders out there that will do 20%?


    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.

    [email protected]330-354-6590
    Brittany Minocchi - Barrett Financial Group, LLC522 Reviews
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    2Reply
  • Colin McMahon
    Lender · Miami · Member since 2022 · 99 posts · 18 votes
    2y

    ALL great advice and information provided above! Here’s a bit of a synopsis:

    1.  DSCRs and condos go hand in hand 
    2.  Anything under 5 units will still be treated as residential single-family in terms of terms, rates, etc.
    3. 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
    4. 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+)
    5. Typical LTV will be around a 70 - 75%. Anything higher and you're likely looking at less than optimal terms/rates
    2Reply
  • Doug SmithPro Member
    Lender · Tampa, FL · Member since 2013 · 2k+ posts · 2k+ votes
    2y
    Quote from @Wayne Doucet:

    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?


     Yep...just closed one on Friday. 

    0Reply
  • Wayne Doucet
    OP
    Member since 2024 · 9 posts · 9 votes
    2y
    Quote from @Colin McMahon:

    ALL great advice and information provided above! Here’s a bit of a synopsis:

    1.  DSCRs and condos go hand in hand 
    2.  Anything under 5 units will still be treated as residential single-family in terms of terms, rates, etc.
    3. 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
    4. 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+)
    5. Typical LTV will be around a 70 - 75%. Anything higher and you're likely looking at less than optimal terms/rates
    Great advice thank you.
    1Reply
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