I am trying to do a cash out refinance on my house but have been denied because it is a legally converted 2 family being used as a 1 fam.(A couple of doors have been removed that separate the units and the 2nd kitchen has been removed)
What I am trying to find out is the easiest way to get the loan approved. From talking to the underwriter I have two options: 1- have it appraise as a 2 fam and 2- have it “re-zoned” as a 1 family.
If I want it appraised as a 2 fam, what is the minimum an appraiser would need to see as far as the 2nd kitchen in terms of appliances, sinks and cabinetry.
If I want it mortgaged as a 1 Fam. what exactly would I need to get changed. What do the banks look at to make this determination(they couldn’t give me a straight answer).
Any help would be appreciated.


What's Your Take? Leave a Comment

  1. Is this one of those crazy new post-crash bank rules? People rip out the rental kitchen all the time in brownstones, and pre-2008, it never affected a mtge or refi (not that I’m an expert, just from what I’ve heard and my own experience). It would hurt your resale value to change the C of O from 2 to 1.

    I know about the 1pt penalty for a 2 family but changing the C of O is a real pain and limits what you or the next buyer can do with your house (many people convert part of their space to a rental once the kids have left for college). Might be worth calling around to see if every bank does this now or you just got (un)lucky.

  2. The underwriter with wells Fargo said its a no go as well another bank after I paid $500 for the appraisal.
    Its still listed as a 2 family with the finance dept. The DOB website has no C of O on file, they just show the dept of finance building classification which is a two family. however I have a copy of one I received when I bought the house in 1995 stating its a 2 fam.
    The kitchen is now a bedroom but the the most expensive part of the conversion, the drain, waste ,vent, gas and water lines are still there.
    My thought was that if I got the finance dept classification changed to a 1fam (which I read somewhere is not that difficult) that may be enough.
    I would have never thought it was such a big deal being its a legal 2 used as a one and not the other way around. Maybe another bank would be able to do it.

  3. Who denied your file? I do this all the time. 2 used as a 1 family all day long. Is the kitchen completely gone?

    If you wanted to go back to a 2 you would need to install the kitchen. Stove, Fridge etc.. Also if it’s legally a 1 now you would need to legally change it back to a 2. Going down in units is OK, up not so OK.

    I would keep it as a 1 since you wouldn’t have the 1pt Fannie Mae price adjustment for 2-4 units thus either a lower rate or lower closing costs.

    -Adam Dahill
    adahill@wcslending.com