A condo questionnaire is a standardized form a DSCR Lender sends to a condominium’s homeowners association (HOA) or property management company. It’s designed to gather detailed information about the entire condominium project, not just your individual unit, so the lender can determine if the project meets eligibility standards and evaluate the additional risks that come from collateral that is part of a project.
While DSCR Lenders generally don’t label projects as “warrantable” or “non-warrantable” (terms used in conventional lending), they almost always use the same conventional condo questionnaire form as a starting point and then apply their own project-level restrictions. The underlying reason is the same: in a condo, the unit’s value and potential rental performance are tied to the overall health of the project and the HOA.
If the HOA runs into trouble, for example, if too many owners stop paying dues or a large portion of the building becomes vacant, each individual unit’s share of the costs to maintain, insure, and repair the property can skyrocket. This is sometimes called the “HOA death spiral”: falling dues revenue leads to deferred maintenance, which leads to declining property values, which in turn leads to more owners walking away or defaulting, driving dues even higher for those who remain. The condo questionnaire is the lender’s primary tool for spotting early warning signs of this type of systemic risk. Condos can be great rental properties, but there are extra documentation requirements and extra restrictions because they introduce an additional risk factor (in addition to the borrower (guarantor) and property (unit) present for all DSCR Loans) that must be evaluated: the condominium project itself. Even a top-tier borrower with great credit and an unblemished history plus a property projected to have low leverage and strong cash flow can face elevated pricing (higher rate and/or closing fee) and eligibility restrictions if the property is within a condo project and HOA with significant issues and risk factors.
Q: Why do DSCR Lenders require a condo questionnaire?
A: Because your unit’s value is tied to the health of the entire condo project, DSCR lenders send a standardized condo questionnaire to the HOA or management company to evaluate project-level risk factors like ownership mix, delinquency rates, reserves, litigation, and insurance. Even a strong-cash-flow unit can be ineligible—or face higher pricing—if the overall project shows red flags.
The main purpose of the Condo Questionnaire is to obtain information about these additional condo project-level risk factors that include information that is often not publicly available or even available on the listing or to the agent or appraisers involved in the transaction.
The main items and risk factors that are covered and relevant to DSCR Loans:
Ownership Breakdown: The HOA must disclose what percentage of units are owner-occupied versus investor-owned. While DSCR Lenders expect high investor concentration, extreme imbalances can still be a concern because buildings with too few owner-occupants sometimes have lower upkeep standards, higher turnover, and weaker long-term financial commitment from owners. Generally, DSCR Loans are available for condo units in projects where even a large majority of units are rentals, extreme concentrations of rental units may be flagged, or cause the property to be separately classified as a “condotel unit.”
Sales/Conveyance Status: In newly built or recently converted projects (i.e. buildings that were previously multifamily apartment buildings converted to condos), lenders want to know what percentage of units have been sold and legally conveyed to buyers. If too many units are still unsold, the developer’s financial stability, and their ability to finish the project, becomes part of the risk equation. If the developer struggles to sell units at the beginning of the stage, they could be faced with financing pressures and the need to dramatically liquidate (sell at low prices) the remaining units, causing valuations to plummet (especially since the subject property would be valued primarily based on sales comps, and the “perfect comps” would be in the same building, which just lost tons of value). As such, DSCR Loans are typically only available for condo units in new condo projects that have already sold at least 90% of units to non-developer owners.
Single-Entity Ownership: The form asks whether any one individual, investor, or company owns multiple units in the project. High single-entity ownership can be risky because if that owner defaults on dues or mortgages, it can have an outsized financial impact on the HOA and the remaining owners and could put unchecked power and dependency on a third-party which can come with all sorts of risk for the owner of a single condo unit and DSCR lender. Typically, DSCR condo loans are only available in condo projects where no single entity, individual or group owns more than 20% of the total units.
Q: Do DSCR Lenders care if one person owns many units in my condo building?
A: Yes. If a single individual, company, or related group owns more than 20% of the units, most DSCR Lenders consider it a high-risk concentration that can destabilize HOA finances and governance, often making the project ineligible.
Delinquency Rates: The questionnaire details how many units are behind on HOA dues and for how long. A high delinquency rate means fewer owners are contributing to the common budget, which can force dues increases or service cutbacks — both of which can hurt property values and cash flow (the difference would often be made up with higher HOA due rates for non-delinquent owners, including presumably, the borrower). Generally, DSCR condo loans are only available for condo projects with no more than 10 or 15% delinquency rates on HOA dues.
Q: How do HOA delinquency rates affect DSCR Loan approval?
A: High delinquency rates, usually over 10–15% of units behind on dues, signal financial stress in the project. That can mean higher dues, deferred maintenance, and declining property values, which often leads to DSCR Loan ineligibility.
Budget & Reserves: The questionnaire also covers the HOA’s operating budget and reserve account balances. A healthy reserve fund signals the HOA can handle major repairs without special assessments, while a thin or depleted reserve fund can indicate future financial trouble. Generally, DSCR condo loans are only available for condo projects with no more than 10% annual budget dollar delinquency (meaning, the total dollar amount of unpaid HOA dues cannot exceed 10% of the HOA’s total annual budget)
Litigation: The form asks whether the HOA is involved in any pending or threatened legal action. Lawsuits related to construction defects, structural issues, or safety hazards can be especially problematic because they signal potentially high repair costs and possible insurance complications. DSCR condo loans are generally ineligible if there is significant pending litigation; however projects with minor or immaterial litigation are typically okay – however, might need an additional LOE in addition to any disclosure found on the Condo Questionnaire.
Q: Why do DSCR Lenders review a condo project’s litigation history?
A: Significant pending litigation, especially over structural, safety, or habitability issues, can bring costly repairs, special assessments, and insurance challenges. Even if the unit qualifies otherwise, major litigation can make the project ineligible.
Commercial Space: The percentage of the building used for commercial purposes (e.g., shops or offices) is disclosed. Excessive commercial space can shift the character of the building, reduce market demand for units, and create additional economic risks tied to business performance rather than just residential stability. Generally, DSCR Condo loans must be in condo projects with no more than 20-30% commercial square footage.
Maintenance & Repairs: The questionnaire asks about major repairs, deferred maintenance, and any planned or ongoing special assessments. This is where lenders identify if the building has serious structural or safety issues or if owners are about to be hit with large, unexpected costs. In addition to the standard requirement of no or very minor (<$2,000) deferred maintenance, generally DSCR Loans for condos aren’t eligible in condo projects with any deferred maintenance found.
Q: What condo questionnaire answers can make my DSCR Loan ineligible?
A: Common deal-killers include: more than 50% investor-owned units, under 90% sold in new projects, single-entity ownership over 20%, HOA dues delinquency above 10–15%, inadequate reserves, significant litigation, excessive commercial space, major deferred maintenance, or deficient master insurance coverage.
Condo project-level insurance considerations are also important risk factors covered in the Condo Questionnaire for DSCR Loans. The lender must evaluate whether the entire project is adequately insured against risks that affect all owners collectively such as the risk of damage to shared spaces (lobbies, hallways, roofs, structural elements) or to the building as a whole.
If the HOA’s insurance coverage is lacking, whether in limits, scope, or financial strength, the cost to repair or rebuild after a loss could be pushed onto all owners, including the borrower in the transaction. That could lead to large, unexpected special assessments, increased HOA dues, and ultimately a decline in (individual unit) property value.
Condo insurance coverages can be complicated and include a bunch of technical terms and items that can be confusing even to the most seasoned real estate investor. Here is a quick rundown of DSCR Loan condo project-level insurance considerations:
Also called a blanket policy, this is an HOA Master Policy that covers the building’s exterior and structural components, common areas like hallways, lobbies, pools, gyms, garages, and storage rooms and fixtures, machinery, equipment and supplies maintained for the project. This is the primary protection for losses affecting the building or shared elements, and it’s funded through HOA dues. Generally, the condo master policy must cover 100% of replacement cost of these items with maximum deductibles, typically around 10%. In addition, if the condo project is in a flood zone, master flood insurance will also typically be required.
Q: What insurance coverage must my condo project have for a DSCR Loan?
A: Most DSCR Lenders require the HOA’s master policy to cover 100% replacement cost with reasonable deductibles (usually ≤10%), at least $1M in general liability coverage, and fidelity/crime coverage equal to three months’ total dues. Flood or earthquake coverage may be required based on location.
An HO-6 policy, also called a “walls-in” policy, is an individual condo owner’s insurance policy. It typically covers the unit’s interior walls, paint and finishes if the master policy stops at the “studs” or “bare walls” and any improvements and betterments (e.g., upgraded cabinets, flooring, fixtures). It will also cover personal property inside the unit and will also typically cover personal liability for incidents occurring inside the unit. If the HOA’s master policy does not cover improvements inside the unit, DSCR Lenders will typically require a borrower to carry their own HO-6 policy and this coverage will typically have a max deductible of 5%.
When it comes to condominiums, the industry standard is for HOAs to carry at least $1 million (per occurrence) in general liability coverage for the entire project, including all common areas under its supervision. This protects against claims for injuries or damage occurring in shared spaces. This is a significant difference for individual insurance requirements for DSCR Loans as generally liability insurance is not required for DSCR Loans and is always optional. Even for DSCR Loans secured by condo units, liability insurance would only be required by the HOA at the project-level, not required for the individual unit at the borrower-level.
Fidelity insurance, sometimes called “crime insurance,” is a specialized coverage that protects the homeowners association (HOA) from financial loss if funds are stolen, misappropriated, or otherwise misused by the people entrusted to manage them. This includes HOA board members, officers, property managers, employees, or even outside contractors who have access to the HOA’s bank accounts. HOAs often manage substantial sums of money, including monthly dues collections, reserve funds for major repairs, and insurance claim payouts. If someone with access to those funds commits fraud or theft, the HOA’s ability to maintain the building, pay for insurance, or handle emergency repairs could be severely compromised, which in turn can reduce the value of every unit in the project. Most DSCR Lenders require the condo project’s master policy to include Fidelity/Crime coverage in an amount equal to at least three months’ worth of HOA dues for all units combined. Note that the DSCR Lender will need the HOA’s full budget to determine this amount, since most standard condo questionnaires don’t ask for annual or monthly HOA fee revenues, and fees can be different per unit so the lender can’t assume total project fees from just the subject unit’s information.
While a DSCR Lender will request and review the condo questionnaire, borrowers are often needed to coordinate with the homeowners association (HOA) or property management company to make sure it gets completed. This can include paying the HOA’s questionnaire fee (commonly $150–$500), signing an authorization so the HOA can release information to the lender and potentially following up with the HOA to ensure the form is completed and returned promptly.
Q: Who pays for the condo questionnaire in a DSCR Loan?
A: In most cases, the borrower is responsible for the condo questionnaire fee charged by the HOA or property management company. This fee, often between $150 and $500, covers the cost of compiling and providing the project-level information your DSCR lender needs to assess eligibility.
Q: How long does it take to get a condo questionnaire for a DSCR Loan?
A: Most condo questionnaires are returned within 3–10 business days, but the exact timing depends on how quickly the HOA or property management company processes requests. Smaller, well-staffed associations may respond in just a few days, while larger or volunteer-run HOAs can take a week or more, especially if they require board approval or have high volumes of requests. Proactively paying the fee, signing the release form, and following up can help shorten the turnaround and keep your DSCR Loan on track.
For more information about DSCR Loans for Condos, check out this guide here!
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