You hear “condo” and “condotel” tossed around in Key Largo and wonder why it matters. The label on your building can change your loan options, rate, timeline, and even your monthly payment. If you are buying or selling, you need a simple way to tell the difference and a clear plan to move forward with confidence. This guide breaks down the key rules, insurance realities, and financing paths so you can make smart decisions. Let’s dive in.
Condos vs. condotels: the real difference
A condominium is a residential community governed by an association and its documents. Lenders review both you and the building to make sure the project meets standard rules for financing under agency programs. You will often hear this called a project or warrantability review, which follows agency standards for condos. Fannie Mae’s project standards explain how lenders evaluate condo projects.
A condotel is a condominium that operates like a hotel. Think front desk, daily housekeeping, nightly rentals, and often a rental pool with a hotel operator. Because it functions like a hotel, many mortgage investors treat it as a different asset type with tighter rules. See the hotel-style features summarized in this condo hotel overview.
Why the label changes your loan
Conventional agency loans
For typical condos, lenders use agency tools to review the project and confirm it is “warrantable.” Common red flags include hotel-style operations, mandatory rental pools, too much commercial space, low reserves, or high delinquency on association dues. If a project trips these issues, standard agency loans may not be available. See the Fannie Mae full review disqualifiers for what can make a project non-warrantable.
Florida has some geographic rules for condo reviews. When a project needs a full or limited review, allowable loan-to-value ratios can be more restrictive than in other states. Check the project status early using a lender’s project review tools and review Fannie Mae’s Florida-specific considerations.
FHA and VA
FHA-insured loans require an approved condo project or a qualifying single-unit approval. Condo hotels and converted hotels are commonly listed as ineligible project types for FHA insurance, which can limit low-down-payment options. Review the FHA rules summarized in this FHA condominium certification overview.
When projects are non-warrantable
If the building operates like a hotel or fails agency review, you are likely looking at portfolio or non-QM financing. Expect higher credit score requirements, larger down payments, and tighter underwriting. Many specialty programs show minimum FICO scores near 700 and maximum LTVs around 70 to 75 percent for condotels. Here is a sample of common market terms from a condotel product overview.
Key Largo rules that matter
Short-term rental rules are a big deal in unincorporated Monroe County, which includes Key Largo. Many areas use a 28-day minimum rental standard and require a Special Vacation Rental Permit where allowed. The rules can influence whether a building functions more like a hotel, which affects financing. Check permit status and rental rules in the Monroe County Special Vacation Rental Program.
Flood exposure affects most properties in the Keys. Much of Monroe County lies in Special Flood Hazard Areas, which drives lender flood insurance requirements and can impact monthly costs. Get flood zone information and elevation details early using the county’s guidance on flooding and floodplains.
Insurance and your monthly payment
Lenders will require hazard coverage, windstorm or hurricane coverage, and flood insurance where applicable. Premiums can be significant in coastal areas, which affects your debt-to-income and loan approval. Ask for an Elevation Certificate, wind mitigation report, and the association’s master insurance details early so your lender can size the true monthly payment.
Appraisals and value for condotels
Condotels often generate income and can be valued differently than residential-only condos. Appraisers may emphasize income potential or rely on sales from similar condotel units rather than owner-occupied condo comps. That volatility can reduce loan amounts or increase required down payments. See a discussion of appraisal approach in this condotel valuation overview.
Buyer checklist: get lender-ready
- Verify the project type. Look for hotel-style operations or rental pools. If it behaves like a hotel, treat it as a condotel until proven otherwise.
- Confirm rental rules and permits. Check for the 28-day standard, Special Vacation Rental Permits, or any transient license tied to the unit or parcel using county resources.
- Ask for association documents. Budget, reserves, insurance certificates, rental policy, meeting minutes, and any litigation or special assessments.
- Collect property risk data. Elevation Certificate, flood zone, wind mitigation features, and any recent insurance quotes.
- Talk to the right lenders early. Ask if they finance non-warrantable condos or condotels, and request current LTV, FICO, and reserve requirements.
Seller tips: help buyers finance faster
- Prepare an association packet. Include budget, reserves, insurance declarations for hazard, wind, and flood, meeting minutes, and any litigation disclosures.
- Clarify rental policy. Document current rules and any vacation rental permits or licenses tied to the unit.
- Set expectations on financing. Note if the project is likely non-warrantable so buyers can line up the right lender and down payment.
- Highlight risk and resilience. Share elevation details and mitigation features that can lower insurance costs and support underwriting.
Plan with a local guide
Financing in the Keys rewards preparation. When you confirm how a Key Largo building is classified, match it to the right loan path, and price in insurance accurately, you close with less stress. If you want a seasoned team to help you align the property, documents, and lender strategy from day one, connect with Island Welcome Real Estate.
FAQs
What is a condotel and why does it affect financing?
- A condotel is a condo that operates like a hotel, with nightly rentals and hotel services; investors and agencies often treat it as non-warrantable, which limits access to standard conventional, FHA, or VA loans and can require larger down payments and higher rates.
Can you use FHA to buy a Key Largo condotel?
- In most cases, no; FHA guidance lists condominium hotels as ineligible project types, so plan for portfolio or non-QM financing instead.
Do Key Largo rental rules impact my loan options?
- Yes; Monroe County’s 28-day minimums and permit requirements influence whether a building functions like a hotel, which can push it into non-warrantable or condotel territory for lenders.
How much down payment is typical for condotels?
- Many specialty programs show higher credit score thresholds and maximum LTVs near 70 to 75 percent, so plan for roughly 25 to 30 percent down or more depending on the lender and your profile.
What extra costs should I plan for in the Keys?
- Expect flood and windstorm insurance, possible higher premiums due to coastal exposure, and association assessments or reserves that factor into approval and your monthly payment.
