The Quick Read: The loan amount is set by whichever limit binds first, coverage or leverage, and high HOA dues only tighten the coverage limit by sitting in the payment side of the ratio, where every dollar of dues takes a full dollar of room away from principal and interest. Non-warrantable status mostly lowers the leverage limit instead. Together they decide how much you can borrow.
- Dues are part of the monthly payment (PITIA). They are never subtracted from rent.
- Each extra dollar of monthly dues removes a full dollar of room for principal and interest. Offsetting it takes more than a dollar of added rent whenever the required ratio is above 1.00.
- Non-warrantable status changes which lenders can take the file and usually lowers the leverage ceiling. It does not change the rent-to-payment math.
- On an investment-property purchase, most files land at 75%-80% LTV, and non-warrantable condos tend to sit at the lower end, subject to the building and the lender.
- Clearing 1.00 does not mean the unit cash flows.
What a Non-Warrantable Condo Is (and Why DSCR Lenders Still Take It)
A non-warrantable condo is a unit in a building that fails the project eligibility rules of the two large secondary-market mortgage buyers. A mortgage insurer’s education blog defines it as a condo project ineligible for purchase and securitization by those buyers. It lists single-entity ownership, excess commercial space, and pending litigation among the causes.
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As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
The label describes the building, not you. A consumer education page notes that the term works by exclusion: a project is non-warrantable when it fails to qualify, not because of one formal definition.
DSCR is the debt service coverage ratio. It compares a property’s rent to its monthly housing payment. These loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. They are non-agency loans, so the government-backed pass/fail tests do not apply. Many conventional lenders decline non-warrantable condos for that reason, and select lenders in our wholesale network take them.
The lender still reviews the building. Expect questions about HOA financials, master insurance, litigation, and rental permissions. DSCR drops the agency tests and your personal debt-to-income ratio. It does not drop the building review.
Key Terms Defined
Non-warrantable condo: a unit in a project that fails the standard mortgage-buyer eligibility rules, often because of litigation, commercial space, or concentrated ownership.
DSCR: monthly rent used for lender review divided by the monthly housing payment. A result of 1.00 means rent equals the payment.
PITIA: principal, interest, taxes, insurance, and association dues. The “A” is the HOA.
LTV: loan-to-value, the loan balance as a percentage of the property’s value.
Reserves: liquid funds, counted in months of PITIA, that you hold after closing.
Special assessment: a one-time charge the HOA levies on owners, usually for a major repair.
How Do HOA Dues Enter the Ratio?
Dues go into the denominator. The formula is monthly rent divided by PITIA, where the “A” stands for association dues. Higher dues mean a lower ratio on the same rent. A condo scores below an otherwise identical single-family rental because of that one extra line.
Dues are never netted from rent. That is the most common modeling mistake. Another is running the ratio on principal and interest alone, which produces a falsely high result. Lendmire’s piece How a Non-Warrantable Condo Is Defined and How HOA Dues Enter DSCR PITIA covers that mechanic in more depth.
Two practical points matter here. Mandatory dues count in full. Some underwriters will exclude optional amenity dues that you can decline, but do not build your offer on that. Also, the figure comes from the association’s documents, not the listing. If dues rise before closing, the ratio is rerun on the verified current number.
How Underwriting Sizes the Loan, Step by Step
Underwriters work backward from rent. The loan amount is whatever payment the rent can carry, converted into a balance, then capped by leverage and loan-size limits.
1. Set rent used for lender review. This is the lease or the appraiser’s market rent. Most programs use the lower of the two, so an above-market lease does not lift the ratio.
2. Divide by the required ratio. At a 1.00 floor, the maximum payment equals rent. At 1.20, the maximum payment is rent divided by 1.20.
3. Subtract taxes, insurance, and dues. These are fixed claims on rent before any principal or interest.
4. What remains is room for principal and interest. That room converts into a maximum loan. A longer amortization or an interest-only period leaves room for a larger loan.
5. Apply the leverage and size caps. The lower of the coverage-based loan and the LTV-based loan is the supportable amount.
Here is the logic with made-up index numbers, not market data. Call rent used for lender review 100 points. Say taxes and insurance together take 15 points and dues take 25.
At a 1.00 floor, maximum payment is 100, so 60 points are left for principal and interest. At a 1.20 requirement, maximum payment is about 83, so only about 43 points are left.
Now raise dues by 10 points. Room for principal and interest falls to 50 at 1.00 and to about 33 at 1.20. The loss is the same 10 points either way. The difference is the cost of fixing it. At 1.20, you need 12 more points of rent to restore the room, not 10.
Dues act like a tax on coverage. Past a certain level, the coverage limit supports a smaller loan than the LTV cap would allow. At that point more equity or a lower price, not a better appraisal, is what closes the gap.
Coverage Limit vs. Leverage Limit: Which One Binds?
The leverage limit binds when rent is strong relative to dues, and the coverage limit binds when dues are heavy. Check both before you make an offer.
| Constraint | What sets it | What high dues do |
|---|---|---|
| Coverage | Rent vs. PITIA | Shrinks room for principal and interest |
| Leverage | LTV tier for the property type | Nothing directly |
| Loan size | Program cap and tier | Nothing directly |
| Reserves | Months of PITIA held after closing | Raises the dollars you must hold |
On an investment-property purchase, most files across our network land at 75%-80% LTV. A non-warrantable condo typically gets the lower end of that range, and the exact ceiling depends on the building, the loan size, and the lender. Standard programs run up to $3,000,000, and a non-warrantable condo is often held to a lower loan cap than a standard single-family file. On a cash-out refinance of an investment property, the ceiling tops out around 75% LTV, with about 6 months of seasoning as the common expectation.
Both tests have to clear. A larger down payment lowers the payment and can lift the ratio. It never erases leverage caps, credit floors, reserve rules, or property eligibility.
What Else Goes Into the Qualification
Credit works the same way as on any DSCR file. A 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage tiers. Non-warrantable files often draw closer scrutiny, so the stronger credit tiers help.
Reserves vary by lender, leverage, loan size, and transaction type. They commonly run around 6 months of PITIA, and loans above $1,500,000 typically step up to about 9 months. Because dues are part of PITIA, high dues raise the reserve requirement too, so a heavy-dues condo asks for a bigger cash cushion after closing.
Select lenders in the network will review coverage below 1.00, with leverage and terms adjusted. That is a separate path from the programs that start at 1.00. Do not count on it for a building that already carries leverage limits.
If coverage is the binding limit, term structure can help. The spine of the network is the 30-year fixed. Extended terms such as 40-year and interest-only periods are available through select lenders. Interest-only counts interest alone, which leaves more room under the ratio for dues. On interest-only loans, reserves are still sized on the full obligation, including dues.
Why Dues Run High in These Buildings
Dues carry master insurance, staffing, amenities, and contributions to the reserve fund. Non-warrantable buildings often run higher because of one or more of these:
- Litigation or a claims history that pushes up the master insurance cost.
- Reserve catch-up, where a thinly funded association raises dues to rebuild its cushion.
- Resort-style amenities and staffing, common in condotels and hotel-style projects.
- Commercial space or heavy rental activity that changes how the building operates.
Read a dues figure for stability, not just size. Ask the association whether an increase is planned, whether a reserve study supports the current budget, and whether any assessment is pending. A low figure in a building with a thin reserve is a warning, not a bargain.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Special Assessments and Dues Changes Mid-Deal
Special assessments are not part of the ratio. Rent comes from the lease or the market schedule, and a one-time charge is not captured in PITIA. You have to budget for it yourself.
That does not make assessments harmless. Large unfunded assessments can still sink a deal on the building review, because they signal that the association is under financial strain.
| Situation | Effect on the ratio | What to do |
|---|---|---|
| Dues rise before closing | Rerun on the higher verified figure | Model the higher number now |
| Assessment pending | Not in the ratio | Ask the association for the schedule and who owes it |
| Assessment paid by seller | None | Get it in writing in the contract |
| Optional amenity dues | May be excluded by some underwriters | Confirm before you rely on it |
Condotels and heavy short-term-rental buildings sit in a tougher corner. They carry higher dues and typically get lower leverage, and a building with heavy short-term-rental activity may be treated as a condotel regardless of its formal label. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. A DSCR loan cannot override an HOA rental ban. Rental permission comes from the HOA documents, not the loan.
Where the Rule Breaks
The status can change. One industry site reports that the investor-concentration test was retired for established projects, so some buildings once labeled non-warrantable may now be warrantable. Older articles on the topic may be out of date. This affects the label, not the DSCR math. Settled litigation or a funded reserve can also restore warrantability.
The second appraisal. Loan size triggers a second appraisal at larger balances, not the non-warrantable label.
The commercial confusion. Residential DSCR divides gross rent by the housing payment. Commercial DSCR divides net operating income by debt service. They are not the same number, so do not mix them.
Ineligible property types. Manufactured homes, log homes, and barndominiums are not offered in the network’s DSCR programs. A condo in a conforming-style building is the normal path. These are different property types entirely.
What Happens When the Ratio Fails
Run these levers in order of effect per dollar.
1. Lower the price. This reduces the loan at any leverage and can cut taxes and insurance too, though dues will not move.
2. Raise the down payment. This shrinks the balance, which lowers principal and interest and lifts the ratio.
3. Change the structure. Ask about interest-only or an extended term through select lenders.
4. Test the sub-1.00 path. It is available through select lenders in the network, with leverage and terms adjusted.
5. Pick another building. Sometimes the dues are the real problem, and no structure fixes that.
Lowering dues is not on the list because you cannot negotiate them. Raising rent is not a separate lever above either, and it only helps within what the appraiser’s market rent supports.
Passing the Ratio vs. Actually Cash Flowing
DSCR compares rent to PITIA and nothing else. Vacancy, repairs, management, utilities, and capital expenses sit outside the calculation. A condo can clear 1.00 and still lose money after those costs. Dues at the high end make that outcome more likely.
Tax treatment varies; consult a qualified professional.
Exit risk matters too. Non-warrantable units can be harder to sell and refinance, because fewer buyers can finance them. If you plan to refinance later, price in that thinner buyer pool. For the full picture of how these loans fit together, read the complete DSCR loans guide.
Documents to Request Before You Offer
Ask for these early. They are what the lender will review.
- The current HOA budget and financial statements.
- The reserve study and the master insurance certificate.
- Recent meeting minutes.
- Litigation disclosures and any engineering reports.
- Special-assessment notices, past or pending.
- The rental restrictions and any minimum lease terms.
- Delinquency records for the building.
The dues figure on this paperwork, not the listing, is the number your ratio runs on.
Frequently Asked Questions
Do HOA dues count in the DSCR calculation?
Yes. Dues sit in PITIA, the denominator of the ratio. They are never subtracted from rent. Mandatory dues count in full, and a dues increase before closing is recalculated on the verified current figure.
Can I get a DSCR loan on a non-warrantable condo with high dues?
It depends on the building, the ratio, and the lender. Select lenders in the network take non-warrantable condos, but expect a lower leverage ceiling than a standard rental. High dues lower the loan the coverage test supports. Both tests must clear, subject to lender guidelines and a building review.
How much does a dues increase change the loan size?
Each extra dollar of monthly dues removes a full dollar of room for principal and interest. That room is what converts into loan amount. At a higher required ratio, offsetting the increase takes more than a dollar of added rent.
Are special assessments included in the ratio?
No. They are not captured in PITIA, so you budget for them separately. A large unfunded assessment can still be a deal-killer on the building review.
Does warrantability change the DSCR math?
No. Same rent plus the same dues gives the same ratio. Warrantability changes which lenders and programs can take the file, and usually the leverage and loan-size limits.
Buying With the Numbers in Hand
Most investors who struggle with a high-dues condo are not rejected on the label. They run out of room under the coverage test or the leverage cap. Work backward from rent, verify the dues against the association’s documents, and price the deal on the true ratio. If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. As a mortgage broker, Lendmire arranges these loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. Program terms change, every file is underwritten individually, and nothing here is a commitment to lend.
About Lendmire
As a non-QM mortgage broker (NMLS# 2371349), Lendmire facilitates DSCR investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed around property-level rental income instead of personal income documentation, subject to lender guidelines, serving LLC-structured portfolios and self-employed borrowers who don’t fit conventional boxes. A two-time Scotsman Guide Top Mortgage Workplace (2025, 2026).
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References
1. Enact: What makes a condominium non-warrantable
2. Homebuyer.com: Non-warrantable condominium
3. Florida Non-Warrantable: What makes a condo non-warrantable
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Can You Get a DSCR Loan With an Unrecorded Lease Option? · How Much a Builder Incentive Can Cover on a DSCR Purchase? · Can a Retiree Get a DSCR Loan on a Beach Condo Short-Term Rental?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
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- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.