Understanding Non-Warrantable Condos
Non-warrantable condos are properties that do not meet the standard guidelines set by traditional mortgage agencies like Fannie Mae or Freddie Mac. These guidelines often include restrictions on investor concentration, commercial space, and insurance policy deductibles. For instance, a condominium might be deemed non-warrantable if the investor concentration exceeds a certain percentage, or if the commercial space within the building is too high.
A Real-World Scenario
Consider a real estate investor looking to purchase a condominium with an investor concentration of 59%, a master insurance policy with a 10% deductible, and commercial space accounting for 42% of the property. Traditional lenders might shy away from such a deal due to these factors. However, at Private Money Lending Corp., we see this as an opportunity to provide a customized financing solution.
Our borrower, in this case, is a seasoned investor with a strong financial profile. They own their primary residence and two other investment properties, boast a 750 FICO score, and maintain a 75% loan-to-value (LTV) ratio. Despite their excellent tax strategy, their reported income results in a 56% debt-to-income ratio, which could be a hurdle with conventional lenders.
Our Non-QM Solution
To address these challenges, we offer a Non-Qualified Mortgage (Non-QM) solution using our Debt Service Coverage Ratio (DSCR) product. This innovative approach allows the borrower to secure financing for the non-warrantable condominium without the need for personal income employment or debt-to-income analysis. Instead, the ability-to-repay is assessed based on the cash flow generated by the property itself.
Our non-warrantable condominium guidelines are designed to accommodate unique property characteristics, allowing for unlimited investor concentration, up to 50% commercial space, and a 10% deductible on the master insurance policy. This flexibility empowers investors to seize opportunities that might otherwise be out of reach.
Non-warrantable condos represent a unique opportunity for savvy investors. With the right financing partner, these properties can become valuable assets in your portfolio. Contact us and speak to a professional who can give valuable advice and point you in the right direction.
