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July 17, 2009
Mortgage Dilemma
We are very close to getting our mortgage. The house is a legal 2 family that is being used as a 1 family. There is not kitchen in the old rental. During the mortgage process we told the bank we may re-convert it back into a rental. Because the bank is taking so long, the closing is coming up very quickly. They emailed yesterday wanting to confirm that we will be renting out the bottom floor as they didn’t account for that in the appraisal. And if we are, they will have to come out a re-appraise and we will also be given a different mortgage rate. They said if we leave it as it is and then decide later to rent it out, they have the right to ask for the mortgage to be paid back in full immediately.
At this stage we won’t get the mortgage on time. Can we just say we won’t rent it out and continue with the process? If we do decide to rent it in the future, how will they know? It's already a legal two family.
Comments
I would proceed with it as a one family as long as you are happy with the rate they are giving you. It is highly unlikely that anything will change once the mortgage is issued, even if you decide to use it as a crack house. :)
Obviously you should not have brought the subject up and this should be a lesson to others out there as well, especially once you are well into the process, it is moving favorably and, you are close to closing.
The mortgage will be sold and you'll never hear from them again unless you miss a payment.
Additionally, if you go the other route and do it as a 2-family, they will require that a kitchen be installed in the other unit.
Posted by: daveinbedstuy at July 17, 2009 8:14 AM
Would agree - but talk to your to see what their opinion is.
It's tough to know what to do in these situations. On one hand, usually best to keep schtum. On other, once in a while these are real issues that you need to raise.
Will all turn out OK. A checkbox on someone's list. Good luck!
Posted by: Johnny at July 17, 2009 9:21 AM
just continue as is (unless somehow you'll get better rate as 2 family).
Makes no difference if you rent out in future as far as mortgage goes.
Posted by: Petebklyn at July 17, 2009 9:28 AM
Truly nuts. When the bank hears rental, it thinks investment property. Follow the above advise and repeat the mantra "this will be our primary residence" to the bank as often as possible.
Posted by: slopefarm at July 17, 2009 9:30 AM
"How will they know?"
They won't, unless you start to become delinquent and they start poking around, in which case they have another arrow in their quiver to foreclose.
Also as DIBS points out, it probably won't appraise and they won't approve until you install the kitchen anyway - dealkiller.
Posted by: NorthHeights at July 17, 2009 10:16 AM
They will not find out unless you default on the mortgage. Keep it as a 1 family, you will have to pay 1pt difference if you do the loan as a 2 family for the Fannie Mae adjustment for multi-units. It is being used as a 1 family currently so you are not doing anything wrong. You can't be expected to pay for a 2 fam when it has not been converted yet or even ever.
I'm a little hurt that you did't come to me for the loan though cobblehiller :(
Just Kidding :)
Posted by: Adam Dahill at July 17, 2009 10:50 AM
Adam, this is not the cobble we interact with. This one has an extra "l" in hilller.
Posted by: more4less at July 17, 2009 10:55 AM
"I'm a little hurt that you did't come to me for the loan though cobblehiller :("
Aw Adam, that's so sweet! But if this were BH and I, we would come to you FIRST! Sadly, it's not, it's that other CobbleHILLLER! [darn you Cobblehilller!!]
Good luck with the house, CH/3Ls!!
Posted by: cobblehiller at July 17, 2009 11:18 AM
What DIBS and Adam said.
Completely wackadoodle.
Also, you didn't mention your down payment, but just FYI the rules change for that on a one vs. two family also, so that's another thing you're best off not getting into.
Posted by: mopar at July 17, 2009 11:43 AM
As mentioned above. Keep quiet. Go forward.
Once you close on the mortgage, they have no reason to know what you do- less you want them to.
Posted by: Brooklynchimp at July 18, 2009 11:14 AM
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