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Condominiums are a common target for real estate investors seeking to operate in high-density markets or enter price-sensitive metro areas where detached homes may be cost-prohibitive. DSCR Loans can be an effective financing option for condo units, but investors should be aware that condos are subject to more complex underwriting than other property types, including additional project-level reviews, additional insurance requirements and eligibility rules. Note that “project” is the real estate terminology for the condo building or total group of units that fall under the same condominium board or HOA.
For DSCR Loans secured by condo units, interest rates will likely be a bit higher (although only mildly, like 0.25%-0.75%) and LTV maximums will likely be slightly lower (such as maximums of 70.0% or 75.0% versus standard maximums of 80.0% for DSCR Loans for SFR or PUD properties).
While condos are generally eligible under DSCR Loan programs, the presence of a homeowners association (HOA), shared legal structure and project-wide risks means DSCR Lenders apply a higher level of scrutiny compared to financing a single-family rental, townhome or even a 2–4-unit property.
To qualify for a DSCR Loan, a condo unit will typically have similar requirements as other property types, such as fully residential in nature, in good condition and containing minimum (i.e. 500 square feet) living space. The key differentiator for DSCR Loans secured by condos is the qualification of the condo project in full, in addition to the standard property qualification requirements of the individual unit. The condo project will be evaluated by both the DSCR Lender and the appraiser, with the lender mostly relying on a document called a Condo Questionnaire to evaluate additional risks that come with lending on condo units. One key condo classification is whether the condo unit is deemed to be “warrantable” or “non-warrantable.”
Q: What’s a Warrantable vs. Non-Warrantable Condo?
A: Common terminology around condo project-level risks and eligibility include classifying a condo unit as warrantable or non-warrantable. This bifurcation refers to whether the unit is eligible for conventional loans (i.e. satisfy Fannie Mae guidelines), where “warrantable” simply means it is eligible for conventional loans, while “non-warrantable” means its not.
For a condo unit to be deemed “warrantable,” it generally has to be free from several types of elevated project-level risk factors that could heighten the risk for a lender. These risk areas typically include areas such as condo project financial health (i.e. budget and reserves, HOA dues delinquency rates), building or shared space condition (i.e. potential for needed capital improvements or special assessments), proper insurance coverage and any other potentially damaging issues (ongoing litigation, owner or investor concentrations, or zoning and legal hurdles).
While DSCR Loans are obviously not conventional loans and follow proprietary rules and guidelines, not Fannie Mae rules, the warrantable vs. non-warrantable classification can come into play for some DSCR Lenders. Most DSCR Lenders will offer DSCR Loans on both warrantable and non-warrantable condo units, with no difference in qualification and pricing (i.e. rates and fees), however some lenders may have slightly different standards for non-warrantable units (i.e. 5% lower LTV maximums or marginally higher rates, like 0.25%).
All condo units will be subject to baseline rules on eligibility for DSCR Loans, regardless of “warrantability.” While unlike conventional loan programs, what may make a condo unit ineligible for a DSCR Loan will vary from lender to lender, the following rules will generally apply:
Florida’s condo market has seen significant changes in recent years due to a combination of factors: aging building stock, rising insurance costs and updated safety regulations following highly publicized structural failures. As a result, many DSCR Lenders have tightened eligibility criteria and added restrictions for condo units in Florida specifically.
The collapse of the Surfside condominium tower in 2021 spurred many lenders to focus on Florida condos when evaluating the risk of DSCR Loans for condo units. Additionally, state regulators added additional rules in 2022 through Florida Statute 553.899, requiring many condo buildings, especially older projects and those near the coast, to undergo additional structural inspections, maintenance and capital expenditure requirements to satisfy new safety rules. Many observers forecasted likely large-scale cost increases for Florida condo unit owners, in the form of special assessments and increased HOA dues, and these predictions have mostly come true. Additionally, in recent years, property insurance rates have spiked in Florida, as the state often sits in the crosshairs of potentially damaging hurricanes. All of these risk factors have created a “perfect storm” of increased risks for condo unit owners, and lenders, including DSCR Lenders, that provide financing for them.
The values of these condo units are deeply impacted by these factors, as increased risk of special assessments, and higher HOA and property insurance costs lead directly to depressed values of ownership. Since DSCR Lenders look at valuation of the collateral, through the LTV ratio, very closely, eligibility and loan terms have been tightened for DSCR Loans on condo units in the Sunshine State for many lenders. While most DSCR Lenders have not responded by making Florida condo units ineligible, they have typically chosen instead to lower LTV maximums (i.e. 65.0% or 70.0% instead of up to 80.0%), require additional documentation and confirmations of recent structural inspections, and worsened pricing for these loans, i.e. charging higher interest rates and/or fees. This is a relatively recent trend among DSCR Lenders, and treatment will likely vary significantly lender to lender, with some not taking the step to restrict eligibility or pricing on condo units in the state.
Q: Are Florida condos harder to finance with a DSCR Loan?
A: Often yes, at least in 2026 and for the foreseeable future. The combination of new regulatory requirements for structural inspections and safety infrastructure investments as well as skyrocketing insurance costs have led many DSCR Lenders to restrict loan programs for Florida condo units, typically in the form of lower LTV maximums, higher documentation requirements, and even slightly higher interest rates.
Up next, check out our guide to Property Condition Requirements for DSCR Loans, an overview on how property condition can make or break qualification and eligibility for DSCR financing.
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