Thinking about buying a condo‑tel in Kihei and not sure how the financing works? You are not alone. Condo‑tels look like condos, but lenders often treat them like a different class of asset because of nightly rentals and hotel‑style operations. In this guide, you will learn what lenders look for, which loan types fit, how terms differ from standard condos, and the documents you will need in South Maui. Let’s dive in.
What a condo‑tel means to lenders
Condo‑tels are condo units that operate as short‑term vacation rentals, often with centralized management and a rental pool. Lenders flag features like frequent guest turnover, shared rental revenue, and significant commercial space within the project. These elements create income variability and more complex HOA cash flows.
Lenders sort projects as either warrantable or non‑warrantable. Warrantable projects meet Fannie Mae project eligibility and similar Freddie Mac condo guidance. Many condo‑tels are non‑warrantable because of transient use or commercial features, which shifts you toward portfolio or jumbo loans.
Financing paths for Kihei condo‑tels
When agency loans can work
If the building is warrantable, you may qualify for conventional financing sold to Fannie Mae or Freddie Mac. These loans often have the most competitive pricing. You still must meet standard borrower guidelines and the project must pass a detailed review.
Portfolio and jumbo for non‑warrantable projects
Most South Maui condo‑tels are financed with portfolio loans from local banks or credit unions, or with jumbo products. These lenders keep the loan on their books and set flexible rules that fit resort operations. Expect tighter terms than a standard condo but better alignment with Maui realities.
FHA and VA are less common
FHA and VA loans are only options if the specific project is approved by those programs. Many condo‑tels are not eligible. Always verify status on HUD’s condominium resources or with VA home loan guidance before you rely on these paths.
Bridge financing or cash
Some buyers use cash or short‑term private financing to meet tight timelines, then refinance later. If you choose this route, plan your end financing in advance to avoid surprises.
What to expect on terms
Down payments and reserves
For warrantable primary residences, down payments can mirror standard condos. For second homes, investments, or non‑warrantable condo‑tels, plan for more. Market practice in resort areas often lands at 20 to 30 percent down, and 30 to 40 percent or more for non‑warrantable or portfolio loans. Lenders may also require 6 to 12 months of cash reserves.
Rates and pricing
Non‑warrantable and investor loans typically price higher than conforming loans. A common range is 0.25 to 1.0 percent above comparable conforming rates, depending on the lender and your profile. You may also see higher point fees or added reserve requirements.
Using rental income to qualify
Lenders can count rental income if it is well documented. Be ready to provide tax returns, rental pool statements, and platform reports. Many lenders apply discounts to account for seasonality and management fees, so they may only use a portion of gross revenue.
Your documentation checklist
Project‑level items lenders request
- CC&Rs, Bylaws, and Condominium Plat
- HOA budgets for current and prior year, plus reserve schedule
- Reserve study and evidence of contributions
- Recent HOA meeting minutes
- Master insurance declarations and coverage details
- Percentage and description of commercial space
- Owner‑occupancy and investor ratios, including any developer holdings
- Any pending or planned special assessments
Unit and borrower items
- Fully executed purchase contract and legal description
- Personal and business tax returns, W‑2s, pay stubs, bank statements
- Asset verification to cover down payment and reserves
- Rental income documents: Schedule E, management statements, platform statements, rental pool P&Ls, and occupancy reports
- Rental management agreement and rental pool rules, including revenue split
- Hawaii tax registrations if using rental income: Transient Accommodations Tax and General Excise Tax numbers
Additional underwriting items
- Appraisal with Maui resort comparables by an appraiser familiar with condo‑tels
- Any required coastal or environmental disclosures
- Title review covering easements, CC&R compliance, and short‑term rental restrictions
Maui specifics you should plan for
Short‑term rental rules and taxes
Kihei and Wailea are tourism‑driven. Regulations and enforcement can change, so confirm a unit’s legal status for short‑term rentals with Maui County planning resources. If you intend to rent, Hawaii requires compliance with state taxes on transient accommodations and general excise tax. Review the Hawaii Department of Taxation guidance on TAT and GET and maintain current registration if lenders will count that income.
Timeline and coordination
Project reviews and HOA questionnaires take time, especially for condo‑tels. Build in 30 to 60 days or more for document collection and lender review. Start lender selection early, and allow time for appraisals, insurance verification, and any rental pool clarifications.
1031 exchange pointers
Many Kihei buyers use 1031 exchanges. Exchanges require strict timelines, a qualified intermediary, and alignment between your lender and title company. For general rules on like‑kind exchanges, read the IRS guide to 1031 exchanges. If the property has a rental pool or you plan personal use, discuss structure with your CPA to preserve the exchange benefit.
Choosing the right lender
Look for lenders with local condo‑tel experience and portfolio options. Local servicing can help resolve issues quickly and align underwriting with Maui norms. If you are in a 1031 exchange, favor teams that regularly coordinate with intermediaries and title companies.
Questions to ask a Maui lender
- Do you lend on condo‑tels in Kihei and what loan products do you offer?
- Do you require a warrantable project or do you offer portfolio options for non‑warrantable condo‑tels?
- What are typical down payment, rate, and reserve requirements for this property type?
- Which documents do you need from the HOA or rental manager and how long does project review take?
- Can you use rental pool income to qualify and what documentation or occupancy assumptions apply?
- Have you closed 1031 exchanges on Maui condo‑tels and what is your process and timeline?
- Do you work with preferred local appraisers, title companies, and attorneys who know Maui resort properties?
A simple path to closing
- Get pre‑vetted with a lender who understands condo‑tels and can issue a project opinion early.
- Confirm the unit’s short‑term rental status with the association and county resources.
- Gather HOA, budget, insurance, and rental pool documents before or immediately after going under contract.
- Order an appraisal with a Maui resort specialist and verify insurance coverage and deductibles.
- If doing a 1031, loop in your intermediary and title company at the outset to align funds flow.
- Build timeline buffers for project review and be ready to supply additional documents quickly.
Common pitfalls to avoid
- Assuming FHA or VA will work without confirming project approval.
- Underestimating down payment and reserve needs for non‑warrantable projects.
- Skipping verification of short‑term rental legality and tax registrations.
- Relying on gross rental projections without accounting for fees and seasonality.
- Delaying lender selection and project review until after you go under contract.
Next steps with a buyer‑only advocate
Condo‑tel financing in Kihei rewards preparation, local relationships, and a clear loan strategy. If you want a quiet, buyer‑first process that aligns financing with your goals, connect with Steven Moody. You will get tri‑island market insight, hands‑on document coordination, and a steady advocate from discovery through closing.
FAQs
Can I use an FHA or VA loan on a Kihei condo‑tel?
- Possibly, but only if the specific project is approved by FHA or VA. Many condo‑tels are not eligible, so verify on HUD’s site or with VA home loan resources first.
How big is the down payment for a non‑warrantable condo‑tel?
- Expect 20 to 40 percent down for many non‑warrantable or investor scenarios, compared with lower options on warrantable primary‑residence condos.
Will lenders count rental income from my Kihei condo‑tel?
- Yes, with strong documentation such as tax returns and rental pool statements. Lenders often use only a portion of gross revenue to account for fees and seasonality.
How long does condo‑tel project review take on Maui?
- Plan for 30 to 60 days or more, depending on HOA responsiveness, rental pool complexity, and lender workload.
What makes a condo‑tel non‑warrantable in Kihei?
- Short‑term rental operations, centralized rental pools, higher investor concentrations, and significant commercial space often push projects outside Fannie Mae and Freddie Mac standards.
What should 1031 buyers know about financing a condo‑tel?
- Coordinate early with your lender, title company, and a qualified intermediary. Review IRS 1031 guidance and confirm your plan if the unit has a rental pool or personal use.
