There are three types of condo classifications that will affect your financing options. That said, the category into which a condo falls will impact your down payment requirements and your interest rate.
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 Condo and Condotel financing since 2007.
The 4 Hawaii condo classifications you need to be aware of are:
- Condominium – warrantable
- Condominium – non-warrantable
- *All New
Condotel (PHL) – Pacific Home Loans in-house programs – lower down payment and interest rate options (some restrictions apply). Now it’s possible to finance your condotel with the same low rate and down payment as a conventional loan.
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 banks condo questionnaire, Form RR105C. See “non-warrantable condo” for potential issues with the Form RR105C 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 Form RR105C 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.
Condotel (PHL) – Pacific Home Loans In-House Condotel Loan Program
This program allows you to finance as a second home (some restrictions apply) and, provided you stay in the unit a minimum of 14 days per year, you will be permitted to rent the unit immediately after closing. It is acceptable to honor future bookings on your purchase contract, too.
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.