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2 unit duplex and a 25% down requirement from the lender?

I want to buy a house (that has an attached guesthouse) and use it as my primary residence. The problem is the listing is listed as "multi-unit duplex" not a single family home. The lender wants to force me to put 25% down instead of the 20% I was expecting.

Is this typical or should I shop around for another lender? If I am going to live there and NEVER rent out the guesthouse, should they change their lending requirements for the down payment?

Advice? Thanks
  • February 02 2011 - Carlsbad
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Answers (10)

Josh...Why are you typing in BOLD...All it does is draw attention to the fact that you are digging up a thread from a month old...and on top of it not making a ton of sense. 

I doubt any lender would lend on an illegal 2 family regardless of Down payment!
  • March 04 2011
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Is the guest house permitted? If it's not then that is why he or she is stating you have to have 20% down.

  • March 04 2011
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Do you currently own any real estate?  If not find another lender.  I can refer you if you would like.
  • February 03 2011
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I think someone is confused.  If you use the property as permanent residence, a 20% down payment should be fine for a conventional loan.  Maybe your lender is concerned that you may truly be buyig the property for investment purposes.  I'd check with another lender.

Another suggestion would be to go FHA?  The downpayment requirement is much lower.  There is only a 3.5% down payment plus closing costs.  They allow you to purchase a duplex as long as you use one as your primary residence residence.  
  • February 03 2011
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An attached guest house sounds like it was added at a later time. You want to be sure it is legally permitted. County records or your Title Company would be able to provide you with this information.

Happy funding, Rudi
  • February 03 2011
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The 25% for 2 units (conventional loan) is only required on investment property, not on owner occupied.   

You mentioned a guest house.  You should check with your agent to confirm the legal number of units.   Sometimes you will see properties that have "granny flats" or "accessory units" marketed as 2 units, when in reality they are Single Family .   A legal 2 unit property will have a bit higher rate/costs than a Single Family on a conventional loan.

Either way, even if it is 2 units, you can certainly purchase conventional with 20% as has been mentioned already in this thread.
  • February 03 2011
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It appears your lender is confused.  I would suggest going somewhere else.

Appraisal is going to be an issue either way unless attached guesthouses are common for the area.  I do not know your area so maybe it is.  In Wisconsin guesthouses are around but usaully not common enough to find enough recent sales to use for an appraisal.  Sometimes the appraisal is done giving no value to the guesthouse which would then be a factor on value.

Your plan to never rent out the guesthouse is not a factor when it comes to how a lender will price/underwrite a loan.

  • February 03 2011
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Let me stress again that if you want a conventional mortgage without mortgage insurance, you can buy an owner occupied 2 unit with 20% down. Your loan officer is confused.
  • February 02 2011
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 FHA allows you to buy a duplex as an owner occupied if you intend to live in one side and use as little as 3.5% down.  I would believe that there is a better way to structure it to make it work for you.  If you want I can recommend a few people who are experts at "getting it done".

  • February 02 2011
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You can buy a 2 unit primary residence with 20% down, find another lender. You can actually buy it with 3.5% down if you like with an FHA loan.
  • February 02 2011
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