Condotel (Condo-Hotel) Mortgages in California

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Call (800) 239-1103.

A condo-hotel, or condotel, is a condominium project that operates like a hotel: units are rented to short-term guests through a managed program, the building offers hotel services, and owners use their unit part of the year. Fannie Mae and Freddie Mac treat these projects as ineligible, so a conventional loan is off the table no matter how strong your credit or down payment is — and many non-warrantable condo lenders exclude them too.

They can still be financed. It takes a lender that has a specific condotel program, and a broker who knows which ones will look at your particular project. That’s the kind of file I take on when the bank says no.

What Makes a Project a Condotel?

Fannie Mae’s Selling Guide lists the characteristics that make a project a condo-hotel. A project is ineligible if, for example, it:

• Is licensed as a hotel, motel, resort or other hospitality entity
• Requires owners to make their units available for a rental pool
• Is primarily transient in nature
• Offers hotel-type services such as registration, daily or short-term rentals, or daily cleaning
• Is professionally managed by a hotel or resort management company
• Has “hotel,” “motel” or “resort” in its legal name (unless it’s only a historical reference)
• Is a converted hotel or motel, unless it went through a full gut rehabilitation

Fannie Mae also lists red flags that trigger a closer look: 75% or more of units owned as investments, units without full-size kitchen appliances, and units under 400 square feet.

What doesn’t automatically make it a condotel: a condo where owners are free to rent their own units, or where rentals are allowed but not required, isn’t a condotel on that basis alone. And in 2026 Fannie Mae retired the investor-concentration limit for established projects, so a building full of rentals isn’t disqualified for that reason by itself. The details in the CC&Rs, rental agreement and HOA questionnaire decide it.

California Condotel Markets

Condo-hotel projects are concentrated in resort areas: Palm Springs and the Coachella Valley, Lake Tahoe, Big Bear, Mammoth, Monterey and Carmel, Santa Barbara, and beachfront areas of San Diego and Los Angeles. Buyers are usually second-home owners who want rental income to offset costs, or investors buying primarily for rental income.

Palm Springs

Palm Springs has both true condotels and ordinary condo complexes that simply have a lot of vacation rentals. The difference matters: a standard, warrantable Palm Springs condo can still get conventional financing, while a hotel-operated project can’t. Look for hotel branding, a front desk or daily housekeeping, a management-run rental program, and CC&R language requiring rental pool participation. Many Palm Springs condos also sit on tribal leased land, which adds a second layer of lender requirements — see Palm Springs leased land mortgages.

Financing Options for Condotels

What Condotel Lenders Look For

• Down payment: meaningfully larger than a standard condo — commonly 25% or more, depending on the lender, project and occupancy.
• Credit and reserves: strong credit scores and several months or more of reserves after closing.
• Project review: HOA budget and reserves, master insurance, the rental management agreement and its fees, and how much of the project the developer or a single entity owns.
• The unit itself: full kitchen, square footage, and a condotel-aware appraisal with comparable sales from similar projects.
• Rental income: for DSCR loans, documented rental history from the management program or a market rent analysis.

Rates are higher than conventional and vary widely by lender and project, so I price the same file with several lenders before you commit.

Before You Make an Offer

1. Send me the address and HOA name so I can check how lenders treat the project.
2. Get the CC&Rs, the rental program or management agreement, the HOA budget and master insurance declarations.
3. Ask the listing agent how recent buyers financed their purchases and whether any loans fell through.
4. If the project is on leased land, get the lease term and remaining years.

Finding out the project type after you’re in contract is the most expensive way to learn it.

Frequently Asked Questions

What is a condotel and why can’t I get a conventional mortgage on one?

A condotel is a condo project that operates like a hotel, with hotel licensing or services, a required rental pool, transient occupancy, or hotel management. Fannie Mae and Freddie Mac list condo-hotels as ineligible projects, so conventional loans aren’t available.

Can I get a mortgage on a Palm Springs condo-hotel unit?

Yes, through portfolio or specialty lenders with condotel programs, or through some DSCR lenders if you’re buying as an investment. Expect a larger down payment and a closer review of the project and rental agreement. Also check whether the unit is on leased land.

Does allowing short-term rentals make a condo a condotel?

Not by itself. A project where owners may rent their own units isn’t a condotel on that basis alone. Hotel services, hotel management, mandatory rental pools or transient operation are what trigger the condo-hotel classification.

Do non-warrantable condo lenders finance condotels?

Many do not. Condotels need a lender that specifically underwrites hotel-condo projects. A broker can check which lenders currently accept your project.

Can I use rental income to qualify for a condotel loan?

With a DSCR loan, yes. DSCR loans qualify on the unit’s rental income rather than your personal income, if the lender accepts the project and the rent covers the payment.

Related Resources

• Non-Warrantable Condo Mortgages
• Palm Springs Leased Land Mortgages
• Coachella Valley Mortgages
• DSCR Loans for Short-Term Rentals
• Second Home Mortgages in California
• SB 326 Condo Mortgage Guide