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Listing issues

I am buying a house using an FHA loan through Quicken.   So far everything has been smooth - I am conditionally approved - the appraisal was done Monday, but I haven't heard back on it.

Right now, Quicken emailed my Realor, who happens to be on vacation.  We put the contract on the house not even a week ago, and I don't think anyone expected underwriting to move along as quick as it did.

In the email they are questioning how the house is listing.  It is listed with the county as a 2 family - as it once was when the house was last bought in 2007.  They never used it as a 2 family, and semi converted it back to a one by taking out a partition to the front door and opening up the stairwell.  It however still has the kitchen upstairs as well as the one downstairs, as well as 2 electric meters.  The two original furnaces were replaced with 1 furnace.  In MLS is is listed as a 1 family.

One of my attractions of this house was how easy it can be converted.  I have every intention of using this as a one family - but way down the road when my sons are older (they are 2 and 5), I like knowing that I can convert back to a 2 family if I want.   Nobody from the inspector to my real estate agent raised any alarms about this - so I'm wondering if it could put my loan in jeopardy?   I also wonder if this got asked because of the appraisal or is it just a formality with Quicken?

Any insight would be greatly appreciated - I'm a first time home buyer, so this is all very new, exciting, and tiring to me.
  • March 05 2014 - US
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Answers (3)

Best Answer

Hello.

The reason the mortgage company, or any bank, would ask this, is to verify that you will be able to rent out the second unit/apartment.  It is an income producing question, since you are buying the house with the intention of renting the second unit out.  The banks usually calculate the rental amount as your partial income for the year, and an addition to whatever your income already is.

If you have question regarding how the mortgage company or the mortgage broker set up your mortgage application with respect to this house, you should ask them.  If the mortgage is set up for you to buy as one family, it is not a problem, but if the mortgage is set up as two family, you might have a problem, or you might want to change some of the info on the mortgage and see if it will still work out with you buying as a one family house, and not adding the rental of the second unit to your yearly income.

I am a little surprised that the real estate agent or/and mortgage broker never mentioned that to you.

Hopefully that helped.

Oleg Volfman
Quick Deal Realty, Inc
[contact information deleted by Zillow  moderator. Please see our Good Neighbor Policy for posting guidelines]
  • March 05 2014
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Profile picture for sheehanje
Thanks for the replies - they are considering it a 2 family now because that's how it is listed in the County records.   There are some comparables in the area, but not many.  2 Family's are actually sought after in the village I'm looking to buy in - but they now consider it a 3 bedroom instead of a 4 because one of the rooms upstairs would now be considered a living room instead of a master bedroom.  So that hurts the appraisal I think.  My DTI was fine when it was considered a single family - so this news isn't helping me any.

Right now I have about a 50% shot of the appraisal coming in where I need it.  I wish the sellers were more honest with the listing - and actually fixed what they were supposed to before the appraisal.  I really like the house, but unfortunately can't come up with a huge difference if the appraiser's numbers come in low.  As a first time home buyer - this process leaves me thinking there is a lot of room for improvement - both in how the system is, and in my knowledge of it.   If this falls through - I may just wait another year before attempting to buy again. 
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The issue the lender could possibly be running into, with regards to an FHA loan, would be comparable properties used to determine the value on the appraisal.

Typically when determining a value on a property an appraiser will use like properties that have sold recently within a specific market. So, if you are buying a single family home an appraiser will use several single family homes in the area that are like the one you are purchasing to give an oppinion of value.

It could be just a question of what type of property the appraiser needs to look for to determine the value.

If the property is unique in nature of if there is a lack of sales data for that specific property type (single family, 2-4 unit, condo, etc) then there is a posisbility the property does not conform to the market. That does't necessarily mean it's a bad or structually deficiant property, it's just not a property that would fit within FHA's guidlines.

The MLS listing stating it's a single family residence may also be irrelevant. If the conversion to a single family residence was never completed, or proper construction permits were never obtain, for all extensive purposes it very well still may be concidered a 2-4 family property.

I would have a conversation with your loan officer with Quicken Loans to see what there exact concerns are, if any. 
  • March 05 2014
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