Non-Warrantable Condo DSCR in Florida: What Changed in 2026

Comprehensive reference: See our non-warrantable condos & condotels guide for lender lists, LTV caps, and national market rules. This article focuses on Florida milestone inspection and HOA timing in 2026.

Florida represents one of the top three DSCR markets in the country by loan volume. It also has more non-warrantable condo inventory than any other state, driven by the post-Surfside milestone inspection requirements that took effect under Florida Senate Bill 4-D. Investors who find a condo they want to finance with a DSCR loan are frequently discovering mid-transaction that the building is non-warrantable — and that their original lender cannot close. This article explains what non-warrantable actually means, how DSCR lenders underwrite these deals, and what to expect in rate and LTV terms when the building doesn’t meet agency standards. For the DSCR loan basics, see what is a DSCR loan.

What “Non-Warrantable” Actually Means

A condo is “warrantable” when it meets Fannie Mae and Freddie Mac project eligibility requirements. A non-warrantable project fails one or more of those tests. The most common triggers:

Investor concentration. Agency guidelines generally require that no single entity owns more than 10% of the units in a project. A building where one LLC owns 20 of 80 units is non-warrantable on concentration alone. This is a common situation in Florida condo buildings that were partially converted to short-term rentals.

Owner-occupancy ratio. Fannie Mae generally requires that at least 50% of units are owner-occupied in established projects (35% in new construction). Florida beach and urban condo markets often have investor-ownership above 50%, making the entire building non-warrantable even for investors who themselves plan to rent the unit.

Litigation. Any active material litigation involving the HOA — including disputes over construction defects, slip-and-fall cases of significant size, or disputes with developers — typically makes the project non-warrantable. This is one of the most frequently overlooked triggers in Florida, where construction-defect litigation involving post-hurricane damage or shoddy new-construction is common.

Commercial space percentage. When a condo project has more than 35% of its space allocated to commercial uses — retail, restaurants, office, or hotel operations — agency guidelines may classify it as a mixed-use project with stricter requirements or ineligibility.

HOA reserve funding. Agency guidelines require that an HOA maintain at least 10% of its annual budget in reserves. Florida HOAs that deferred capital work pre-Surfside and are now rebuilding reserves may fall below this threshold during the funding period.

Any one of these conditions creates a non-warrantable classification. Many Florida condos today trigger two or three simultaneously.

Florida’s SB 4-D Milestone Inspection Law

Florida Senate Bill 4-D, signed in May 2022 following the Champlain Towers South collapse, imposed new structural integrity inspection requirements on condominium buildings three or more stories tall. The law created a cascading inspection timeline that has significantly affected lender willingness to close on affected projects.

Phase 1 milestone inspection: A licensed engineer or architect conducts a visual inspection of the building’s structural components. Buildings that are 30+ years old (or 25+ years for those within 3 miles of the coast) were required to complete Phase 1 by December 31, 2024.

Phase 2 milestone inspection: If Phase 1 reveals a concern — defined as damage or distress that may affect structural integrity — the engineer must conduct a Phase 2 inspection involving detailed examination and potentially destructive testing. Phase 2 findings create a repair mandate and timeline.

The financing consequence: A building that has completed Phase 1 with no findings is the cleanest outcome. A building with a Phase 2 underway, or one that failed to meet the Phase 1 deadline, introduces structural uncertainty that most agency lenders — and many non-QM lenders — will not underwrite. DSCR lenders who operate in Florida have been sorting condo buildings into tiers based on their inspection status since 2023.

A building that has a Phase 2 repair plan in place with HOA assessment funding allocated is materially different from a building that has not yet scheduled its inspection. The former may be financeable at a haircut; the latter is likely not financeable at any DSCR lender until the inspection is complete.

Which DSCR Lenders Allow Non-Warrantable Condos — and Which Don’t

Non-warrantable condo DSCR financing exists but requires lender selection that matches the specific non-warrantable trigger. The lender posture matrix below reflects typical current-market program parameters; individual programs vary.

The rate additions are cumulative with other property-type adjustments. A non-warrantable condo in a Florida STR-heavy market with an investor-concentration issue and active litigation could face rate additions totaling 0.75–1.25% over a standard SFR DSCR rate.

LTV Haircuts and Rate Adjustments in Practice

The LTV haircut on non-warrantable deals is not a punishment — it reflects the lender’s collateral risk. A non-warrantable condo carries liquidation risk that a standard SFR does not: if the HOA collapses, the building undergoes forced special assessments, or litigation produces a judgment, the unit’s value can drop sharply and quickly. A 5–10% LTV reduction (from 75% to 65–70%) is the lender’s buffer against that collateral deterioration.

The rate premium serves the same function. A lender pricing a non-warrantable Florida condo at +0.50% is not being arbitrary — they are pricing for a book of collateral that has statistically different loss characteristics than their standard DSCR portfolio.

For investors, the practical question is whether the deal still works at the reduced LTV. More equity at close means more cash into the deal. If the purchase price is $550,000 and you were underwriting at 75% LTV ($412,500 loan), a 65% LTV requirement means a $357,500 loan and $57,000 more down payment. That changes the deal’s cash yield and may change whether it pencils.

The Condo Questionnaire Process

The condo questionnaire (sometimes called a project eligibility questionnaire or CPM — condo project manager questionnaire) is the document lenders use to determine whether a project meets their guidelines. Understanding what’s on it — and who completes it — prevents delays.

Who fills it out: The HOA management company or board secretary completes the questionnaire. The lender sends it directly to the HOA or to you for forwarding. Some HOAs charge a fee ($150–$400 is typical) for questionnaire completion.

What it covers:

• Total number of units; number owner-occupied vs. investor-owned
• Percentage owned by any single entity
• Current HOA budget and reserve balance as a percentage of budget
• Pending or active litigation, with a description
• Commercial space percentage
• Any special assessments in the last 24 months and any planned assessments
• Delinquency rate on HOA dues (lenders generally want below 15%)
• Status of milestone inspection (Phase 1 complete / Phase 2 underway / not yet started)

Common deal-killers on the questionnaire:

1. Litigation description that reveals a material construction-defect suit or a pending Surfside-type judgment
2. Reserve funding below 10% of annual budget with no plan to bring it current
3. Phase 1 milestone inspection showing the building never completed it
4. Owner-occupancy below 20% in a building where the lender requires 35%
5. HOA dues delinquency above 20%

The questionnaire is not a soft document — lenders make hard decisions based on it. Getting the questionnaire early in your due-diligence window, ideally during inspection contingency rather than after, protects your earnest money if the answers are unfavorable. For a broader list of DSCR deal-killers and how to address them, see why DSCR loans get denied and how to fix them.

Worked Example: $550K Tampa Condo — Warrantable vs. Non-Warrantable

A Tampa investor targets a $550,000 condo near the Riverwalk. The unit rents for $3,200/month. The building is 32 years old and recently completed its Phase 1 milestone inspection with no findings — but 62% of units are investor-owned, making it non-warrantable on owner-occupancy alone.

Assumptions: Rate is 7.25% (30-year fixed) for non-warrantable; 6.875% for warrantable equivalent. Monthly taxes + insurance: $620.

This example produces a counterintuitive result: the non-warrantable deal at 65% LTV has a higher DSCR than the warrantable deal at 75% LTV. The lower LTV reduces PITIA enough to offset the rate premium. The investor carries more equity, but the DSCR calculation is cleaner.

The warrantable scenario at 75% LTV produces a DSCR of 0.96 — below the 1.0 minimum at most lenders. This property would not qualify for standard DSCR financing at 75% LTV regardless of its warrantable status. The real comparison is whether the investor can absorb the additional equity required to close at 65% LTV and still generate an acceptable cash-on-cash return.

At $357,500 loan on a $550,000 purchase, the investor needs $192,500 plus closing costs. If cash yield at 65% LTV still meets the investor’s threshold, the non-warrantable label is not a deal-killer — it is a capital structure problem with a known solution. For DSCR state-by-state context on Florida specifically, see our Florida DSCR loan guide.

Florida Condo Due Diligence Before You Write the Offer

For any Florida condo purchase, run this sequence before committing earnest money:

1. Request the condo questionnaire or HOA disclosure package from the listing agent. Florida law requires sellers to provide HOA documents; use them.
2. Verify milestone inspection status by requesting the Phase 1 report from the HOA or checking the county building department records.
3. Check litigation status with the HOA or through county clerk court records for the building address.
4. Confirm owner-occupancy ratio — the HOA questionnaire will show this, but you can also check property appraiser records for the percentage of units with homestead exemptions.
5. Run the DSCR at 65% and 70% LTV using the DSCR calculator to confirm the deal works before you negotiate the purchase price around an assumption of 75% LTV financing.
6. Ask your lender broker which programs are currently active for non-warrantable Florida condos. Program availability changes monthly — a lender that closed a similar deal in Q1 may have pulled back in Q2.

Pre-qualify your Florida condo before you write the offer. Submit your scenario at /get-matched/ and we’ll identify which lenders in our network are actively closing non-warrantable Florida condos right now — including what LTV and rate to expect given the building’s specific non-warrantable trigger.

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