While condo purchases have been a great investment for many people, with the rise of Airbnb and VRBO rentals, some changes have been put into place. As of December 7, 2020, all condo purchases and refinance applications will be examined to determine if the condo is a “Condotel” (condo + hotel). If it is determined to be a short-term rental property, then conventional financing will not be available.
What Qualifies a Condo As a “Condotel”
The criteria used to determine if your condo purchase will be used as a short-term rental, and therefore, not eligible for conventional financing are:
- A resort area or tourist location
- A high number of short-term rentals when searching the area on the internet
The next 3 apply to your specific unit and the whole condo real estate project:
- Not a principal residence, and over 75% of units are owned as 2nd homes or investment properties
- No full-sized appliances in the kitchen
- Units under 400 square feet
If you can check the box on two of these items for your condo purchase, then your property will undergo great scrutiny. If three or more of these points apply to your condo purchase, it will be considered a condotel and ineligible for conventional financing.
In Sun Valley, the first 2 bullet points will apply to the condo purchases in the area. If you are planning on using the unit as your primary place of residence, you should qualify for conventional financing. If you are purchasing the condo as an investment or second home, be ready to get a condo questionnaire and answer the required questions to try to qualify for conventional financing.
Good News for Real Estate Purchases in 2021
There has been an increase in the conforming loan threshold. It has been increased to $548,250. And the high-balance conforming loan cap will remain the same at $625,500.
This means that more buyers will qualify for conforming financing. With these easier standards to qualify, you will also reap the benefits of lower down payments and better interest rates.
Contact a Local Real Estate Expert
If you are looking to buy property in Sun Valley and have questions about short-term rentals or second home properties, do not hesitate to contact Kirsten DeHart at Wood River Properties. If you would like to learn more about luxury real estate in beautiful Sun Valley: (208) 721-4131.