The Quick Read: A non-warrantable condo can carry a DSCR loan above $1 million, but the building sets the ceiling, not the borrower. Through select wholesale programs, a non-warrantable condo tops out at 75% leverage and a $1,500,000 loan, subject to underwriting. So “above $1 million” really means the band from $1,000,001 to $1,500,000. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
- A non-warrantable condo is a financing label on the project. It is not a defect in the unit or a judgment on the borrower.
- DSCR loans are not sold to the agencies, so agency project rules are not the gate. The lender still reviews the building.
- HOA dues sit inside the monthly obligation, so they pull coverage down dollar for dollar.
- Reserves of 6 months on the subject property are typical, and 12 months for first-time investors, subject to underwriting.
- A condo that needs a loan above $1,500,000 cannot use this path, whatever the borrower’s credit or assets.
This explainer walks the file start to finish: what the label means, how the review runs, where the rules bend, and how an investor should decide. For the full product background, see the complete DSCR loans guide.
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What Does Non-Warrantable Actually Mean?
Non-warrantable is a label for the project, not the unit. A building earns it when it fails the checklist that agency-eligible condo projects must pass. Nothing is wrong with the unit itself. The building just falls outside the box.
One education site notes that the term is not formally defined in guidelines. Buildings apply for warrantability, and those that fail are non-warrantable by exclusion.
For contrast only, the Fannie Mae Selling Guide lists project traits that make a condo ineligible for agency purchase. Examples include hotel or motel operation, commercial space and mixed-use allocation, and split ownership arrangements. Agency rules change often. They do not govern a DSCR file, and this article does not treat them as DSCR rules.
Common triggers a reviewer looks for:
- High investor concentration or heavy single-owner holdings.
- Thin association reserves or delinquent dues.
- Pending litigation against the association.
- Commercial space inside the building.
- New construction, presale status, or developer control.
- Hotel-style features, such as a rental pool or daily rentals.
- Unfinished critical repairs. These keep a project ineligible in the agency world until the work is done, as KSN Law’s summary of condo guidance explains.
Why Can a DSCR Loan Finance These Buildings?
DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. They are not sold into the agency pipeline. That is why a building that fails agency review can still be financed.
It does not mean the building is ignored. Across the wholesale network, the project still gets reviewed on the lender’s own checklist. Some lenders treat warrantable and non-warrantable condos nearly alike. Others price the difference or decline the building outright. The spread between lenders is wide. That is where placing a file with the right program matters.
Which Problems Block Only Conventional Loans, and Which Block Everyone?
Most building problems sort into two groups. The first group blocks agency-style loans only. The second group blocks nearly every lender, DSCR included.
| Building issue | Typical effect on DSCR file |
|---|---|
| Investor-heavy ownership | Often reviewable, subject to underwriting |
| Commercial space | Often reviewable, subject to underwriting |
| Thin association reserves | Reviewed, may cut leverage |
| Pending litigation | Reviewed case by case |
| Active construction or developer control | Frequently a hard stop |
| Ban on rentals at your planned term | Hard stop for that plan |
| Ground-lease structures | Lender-specific overlay |
Treat the table as a pattern, not a promise. Each lender sets its own overlays, and every file is underwritten individually. A rental ban matters only at the term you plan to use. A minimum-stay clause can push a short-term plan back into long-term-rental math.
What Changes Above $1 Million?
On a standard rental, leverage steps down as the balance rises. On a non-warrantable condo, the building type overrides that ladder. Through select wholesale programs, the ceilings look like this, subject to underwriting:
| Property type | Balance band | Purchase leverage | Cash-out leverage |
|---|---|---|---|
| Standard rental | To $1,000,000 | 80% | 75% |
| Standard rental | $1,000,001 to $1,500,000 | 75% | 70% |
| Non-warrantable condo | Up to $1,500,000 | 75% | 75% |
| Non-warrantable condo | Above $1,500,000 | Not available | Not available |
Two points stand out. First, the non-warrantable condo cap sits at 75% and $1,500,000 on both purchase and cash-out. Second, the size ladder that runs to $10,000,000 for standard rentals never opens for these buildings.
Credit follows the same logic. The program floor is 660. The 700 floor above $3,000,000 never comes into play, because a non-warrantable condo stops at $1,500,000. Cash-out also tightens as balances grow: none is available for borrowers at 680 or below above $1,500,000 on other property types, and the cash-out proceeds cannot satisfy reserves.
Two appraisals apply above $2,000,000. That also falls outside this property type’s ceiling, so a single appraisal is the normal path here.
How Does Underwriting Run, Step by Step?
The sequence below is how these files move through a typical wholesale lender.
1. Classify the project. The HOA or management company completes a condo questionnaire. Reviewers read investor concentration, litigation, reserves, delinquent dues, commercial space, insurance and rental features. Condo associations often have to work with lenders to learn project status, because access to the agency ineligible-project list is typically restricted to lenders.
2. Run the building’s own checklist. The lender asks for the questionnaire, an insurance certificate, a reserve study and a litigation letter. There is no agency waiver to lean on.
3. Test the unit’s income. Coverage is monthly rent divided by the full monthly obligation: principal, interest, taxes, insurance and association dues. Coverage of 1.00 earns full leverage. Coverage from 0.75 to 0.99 is a real path through select programs to $2,000,000 at reduced leverage, but LTV and terms adjust, subject to underwriting.
4. Check reserves. Six months of the full monthly obligation on the subject property is typical, and twelve months for first-time investors. Cash-out proceeds cannot count toward reserves.
5. Order the appraisal. The appraiser uses a standard rental analysis. The rent schedule form (1007) and the small residential income form (1025) are the usual appraisal references.
6. Assemble closing documents. Entity papers, if the unit is vested in an LLC, go in with the rest. Entity vesting is welcome through select programs, with no layered entities, subject to lender program requirements.
The first step is where files stall. A questionnaire that comes back incomplete, or a reserve study that is missing, holds the whole file. Request those documents before spending on an appraisal.
A Worked Example: Dues Drag Coverage
Run the numbers on two buildings at the same price, the same rent and the same loan. Say a unit is priced at $1,400,000 and financed at 75% leverage on a purchase. That puts the loan inside the $1,500,000 cap. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
In Building A, association dues are modest. Rent covers the full obligation at roughly 1.15x. In Building B, a high-amenity tower, dues are far higher. The rent has not changed, but the same unit now covers at roughly 0.95x.
Same rent. Same loan. Different building. The dues line moved the number below 1.00.
Building B is not dead. A few paths exist, each subject to underwriting:
- Bring more cash to the table to lower the loan and the monthly obligation.
- Look at a program that reviews coverage in the 0.75 to 0.99 range, where LTV and terms adjust.
- Consider an interest-only period, which runs up to 120 months and up to 75% leverage with coverage of 0.75 or better, qualified on the interest-only obligation.
- Pick a different building with lower dues. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
High-dues luxury buildings are where the 1.00 benchmark binds first. Ask the association for dues early. They can move coverage more than almost any other line.
Where the General Rule Breaks
Condotel is not the same as non-warrantable. A condotel is one kind of non-warrantable project, but the terms are not synonyms. Through select programs, condotels run to 75% on a purchase and 65% on a refinance, a $1,500,000 loan, with $250,000 cash-in-hand. They are for experienced investors and are not on the no-ratio track.
Rental pools. Coverage is usually tested on twelve months of operating history at 80% of gross, against the full obligation including dues. A large pool share can push coverage below 1.00. Short-term rental rules vary by city, county, HOA and property type, so investors should confirm local rules before relying on projected rental income.
Newly non-warrantable on refinance. A building can slip into the label between purchase and refinance. A branded building that loses its hotel affiliation is one example.
The label can be cured. One analyst notes that status is fixable, but it takes board action, a funding plan, and time. A building that failed last year may pass now.
No-ratio. No-ratio paths reach $2,000,000 through select wholesale programs, with a seven-year clean housing history and 0x30x24, subject to underwriting. Condotels are not on that track, so this is rarely the route for these buildings. Lendmire’s piece How a No-Ratio DSCR Loan Above $1 Million Works covers that structure.
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.
What Does the Investor Decision Look Like?
Start with the loan size. A condo priced at $1,400,000 with a 75% loan sits inside the cap. A condo that needs a loan above $1,500,000 does not fit this path, and a standard-rental ladder will not rescue it. That is the loan-size trap.
Then weigh the leverage gap. A standard rental can run 80% only up to $1,000,000. Above that, both property types sit at 75%, so the gap is narrower than it looks on larger balances.
Plan for liquidity. Six months of obligation on a seven-figure loan is a large cash requirement, and it cannot come from cash-out proceeds.
Think about the exit. A smaller buyer pool is typical, as GoverningDocs notes in its discussion of resale effects. Future buyers face the same financing hurdle. Million-dollar condos also trade thinly, which can make appraisal comps harder to find.
When DSCR is the wrong tool, other structures may fit better, such as an income-documented jumbo or an asset-based option. Lendmire arranges financing through select lenders in its wholesale network and can help compare options. Lendmire’s related piece on how sub-1.0 coverage LTV rules work on a non-warrantable condo covers the reduced-leverage side in more depth. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Pre-Offer Document Checklist
Request these before the appraisal is ordered:
- Condo questionnaire and current budget.
- Master insurance certificate.
- Reserve study.
- Litigation disclosures and association minutes.
- Rental restrictions and minimum-stay rules.
- Owner-to-renter ratio and delinquent dues.
- Lease or rent evidence for the unit.
- Entity documents, if the unit will be vested in an LLC.
- Proof of reserves from sources other than cash-out.
- For a condotel, the rental or management agreement and twelve months of booking and income reports.
Key Terms Defined
Non-warrantable condo: A condo project that falls outside agency eligibility, a label on the building rather than a flaw in the unit.
DSCR (debt service coverage ratio): Monthly rent divided by the full monthly obligation, including taxes, insurance and association dues.
Condotel: A hotel-style condo project, one type of non-warrantable building, with its own ceilings.
Reserves: Liquid funds the borrower holds against the subject property, typically six months of obligation.
Rental pool: An arrangement where unit owners share rental income managed by a central operator.
Interest-only period: A stretch of up to 120 months where the payment covers interest alone, available through select programs, subject to underwriting.
Frequently Asked Questions
Can a DSCR loan above $1 million be used on a non-warrantable condo?
Yes, up to $1,500,000. Through select wholesale programs, the ceiling is 75% leverage on both purchase and cash-out, subject to underwriting. Above $1,500,000, the building type blocks the file. These specifics are subject to lender guidelines and a full review of property, leverage, and credit.
Is a non-warrantable condo the same as a condotel?
No. A condotel is one kind of non-warrantable project. Condotels have their own limits: 75% on a purchase, 65% on a refinance, a $1,500,000 loan and $250,000 cash-in-hand, for experienced investors only.
How many months of reserves are typical?
Six months of the full monthly obligation on the subject property is typical, and twelve months for first-time investors, subject to underwriting. Cash-out proceeds cannot satisfy reserves, so the funds must come from other liquid sources.
Do HOA dues affect the coverage number?
Yes. Dues sit in the denominator with principal, interest, taxes and insurance. In high-amenity buildings, dues are often what pushes coverage toward or below 1.00.
Can a building shed the non-warrantable label?
Sometimes. It takes board action, a funding plan and time. A building can also pick up the label later, so status is worth rechecking at each refinance.
Next Step
If you are buying or refinancing a high-balance rental property and want to see how the numbers work, Lendmire can help you compare super jumbo DSCR loan options based on the property income, the loan balance, credit profile, leverage, and investor goals. Programs change, every file is underwritten individually, and nothing here is a commitment to lend. Tax treatment varies; consult a qualified professional.
Lendmire’s self-employed mortgages page presents both super jumbo programs, bank statement and DSCR, side by side.
About Lendmire
Lendmire, NMLS# 2371349, is a mortgage brokerage focused on investor financing, arranging DSCR loans in 40 states plus Washington, D.C. — 41 markets total. Qualification is based on the property’s income rather than personal income documentation, subject to lender guidelines, making it a fit for LLC-held rentals and scaling portfolios. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Homebuyer.com: non-warrantable condo
2. Fannie Mae Selling Guide B4-2.1-03
3. KSN Law: Fannie condo guidance
4. GoverningDocs: why a condo might be non-warrantable
This article is part of Lendmire’s super jumbo DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: IO ARM vs Fixed DSCR Loans on Non-Warrantable Condos · How Super Jumbo DSCR Loans Work for the Luxury Portfolio Investor · How Super Jumbo DSCR Loans Work for Founders Investing After a Liquidity Event
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.