It is important for you to know that most mainland lenders do not have the experience required to lend on the majority of Hawaii condos which fall into these classifications. In fact, most mainland lenders do not even realize they can’t finance a Hawaii condo until about two-thirds of the way through the escrow process, which is well after your loan has been approved! While it is not uncommon for clients to shop an interest rate when shopping for a mortgage, if you’re considering purchasing a condo in Hawaii, working with a local lender benefits everyone involved.
Pacific Home Loans has specialized in Hawaii and California Condo and Condotel financing since 2007.
The 4 Condo classifications you need to be aware of are:
- Condominium – warrantable
- Condominium – non-warrantable
Condominium – Warrantable
The warrantable condo classification is for condos that meet “Agency” guidelines. The following loan programs are considered “Agency” loans: Fannie Mae, Freddie Mac, and most government loan programs such as FHA, VA, and USDA. There are many factors that determine if a condo is financeable with an “Agency” loan, such as the following:
- Vacation Rentals
Vacation rentals can be daily, weekly, and monthly. Any property that allows a lease that is less than six months is considered a short-term rental or a vacation rental condo. In most cases, a condo complex that is permitted to offer short-term rentals will not be eligible for an Agency loan.
- Condo Documents
In order for a condo to be classified as “warrantable” the subject condo property manager will complete the bank’s Condo Questionnaire (Form RR105C in Hawaii). See “non-warrantable condo” for potential issues with the Condo Questionnaire that will require your condo to be financed with a non-warrantable portfolio condo loan.
Non-warrantable condos are not eligible for the “Agency” loan programs that warrantable condos are approved for. Your PHL Loan Officer will determine which classification your condo falls under. If your condo is classified as non-warrantable, you will be offered one of PHL’s Portfolio loan programs with a competitive rate.
The following information reported on Condo Questionnaire will classify a condo as non-warrantable:
- Vacation Rentals are allowed
- More than one owner owns 10% of the total condos in complex
- Pending litigation against the HOA
- More than 10% of the owners are delinquent on HOA fees
- More than 10% of the annual budget is from HOA owned condos
A Condotel is a term used to describe a condo-hotel. A condotel possesses some hotel-like amenities such as a front desk for checking in and out, an activities or concierge desk, and daily or weekly maid service. Due to Hawaii being a top destination resort community, many condos operate as a condotel.
Please note: Condos must have full-sized kitchen to be financeable.
Pacific Home Loans proudly offers financing options for all condo classifications. Visit our Condo Loan Programs page for more information.