A condo hotel (condotel) is a great way to own a luxurious vacation home without the traditional hassles of ownership such as property maintenance and finding renters when you're not using it.
Buying this type of property is similar to purchasing a typical condominium. However, there are a few extra considerations that lenders evaluate when underwriting the loan. Consider the following frequently asked questions about condo hotel financing.
Most lenders qualify you based on your income and underwrite the file as if it was an investment property. Unlike traditional residential deals, the lender will not count potential rental income from the property for qualifying purposes.
Overall debt-to-income ratio should be no more than 45%.
Depending on the type of financing you require, the lender may need to pre-approve the project in order to allow certain terms on the loan. Condo hotels are particularly common to urban, popular tourist cities such as Las Vegas, Miami and New York so buying a unit in those kinds of location should be straightforward.
Most lenders like at least 70% of total units under contract before financing a unit in that project. However, certain lenders do not have any pre-sale requirements as long as they have pre-approved the project.
As long as the commercial space and usage is limited, is typical to that area and project, and the project is residential in nature, most lenders will finance your deal.
Most lenders require units to be at least 500 sq. ft., as the larger the unit, the more desirable it is for rental and resale. Some lenders will waive minimum size requirements as long as the project is pre-approved. Others will require that condo hotel units have at least basic kitchen facilities.
Condo-hotels buyers are usually required to put a minimum of 20% down payment although a higher down payment could be required on a larger purchase price.
In general, secondary financing is not allowed.
Just like any other residential loan the lender will require documentation about your income and assets and will check your credit. For a complete list of documents that you will need to provide, see our Document Checklist for Preapproval.
