Do I have any chance of persuading the bank this is a single family home?

I’m about to buy a 1500 sq foot house, to use a single family home. It is classified with the NYC Dept of Buildings as “B3: Two family converted from one family.” I would like to get a mortgage at the single family rate, as my lender charges half a large premium for 2 family. Here’s my argument: 1) There’s no Cof O (it’s too old) so its legal status as a 2 family is shaky. 2) It was a single family until 2002, when the current owners had it reclassified as a 2 family. However, they only used it as a 2 family for three years. It’s been used as a 1 family for the last seven years. 3) The second kitchen, installed in 2002, was removed again in 2005, hence the property is not usable as a 2 family. 4) I believe it was only usable as a 2 family through the illegal renting of the cellar as living space. 5) It’s only 1500 sq feet for godsake. Do you think I have any chance or are these things set in stone? It would help if I knew WHY the banks charge a premium for 2 family – is it to do with greater perceived risk from having tenants, and if so, shouldn’t its intended use be the key factor? (And with no second kitchen, I can’t really be lying about its intended use). thanks.

pocketdora

in Mortgage 12 years and 6 months ago

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theoperadiva | 10 years and 6 months ago

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In case anyone is reviewing this thread for mortgage broker details, I wanted to share updated information for Ryan Pratt: Ryan Pratt Private Mortgage Banker NMLSR ID 64766 Wells Fargo Home Mortgage | 150 East 42nd Street, 31st Fl | New York, NY 10017 MAC J0161-311 Tel 212-214-7743 | Cell 347-866-9983 | Fax 877-401-6135 Ryan.Pratt@wellsfargo.com

vthatcher | 12 years and 6 months ago

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1 Kitchen- No CO- I can do this as a Single Family     Vanessa Thatcher Senior Loan Officer   Atlantic Home Capital 4175 Veterans Memorial Hwy Ste 310 Ronkonkoma, NY 11779   Office: 631-687-3510 x106 Direct Fax: 631-918-5222 Cell: 631-672-4113

AtlanticAlex | 12 years and 6 months ago

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Agree with Adam. The key is to save your arguments for the appraiser. Show him there’s no second kitchen and that’s it being used as 1-family (and he should therefore use 1-family comps). Once he writes it up that way, the banks will usually just go with whatever is in his report.

pocketdora | 12 years and 6 months ago

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Interesting – sounds like it is not cut and dried, in any case. To add a bit more information: 1) The mortgage is a jumbo portfolio loan 2) My preferred lender is my credit union, Quorum, who charge half a percent more on 2 family properties (Citibank have said they would do the 2 family for only an eight of a percent more than a single family, but I would really prefer to use my credit union, and their rates are better for single family) 3) Apparently the B3 classification is with the Dept of Finance, not the Dept of Buildings (sorry).

adam_dahill | 12 years and 6 months ago

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Sorry greenwoodger, true Astoria and Ridgewood do not charge a premium for 2-4 units but both Astoria and Ridgewood need the C of O or classification to match the number of units. They recently implemented this policy about 1 year ago at least with Astoria, I believe Ridgewood has required it longer. Plus their 30yr fixed rates on the portflio product are much higher than Fannie Mae rates. Astoria and Ridgewood are better lenders for JUMBO or ARM loans. All Fannie Mae and Freddie Mac lenders have a 1 point LLPA (loan level price adjustment) for 2-4 units regardless of the Loan to Value. You may have not thought you were charged a premium but you most certainly were if it was a Fannie/Freddie loan. The rate you would have gotten would have been slightly higher to account for the additional price adjustment. You just didn’t pay it out of pocket. That said many lenders will treat the the property as a 1 unit as long as there is only 1 kitchen and the appraiser uses 1 family comps.  I have done this numerous times.  -Adam Dahill

greenwoodgeneral | 12 years and 6 months ago

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My lender didn’t charge me a premium due to the fact that my home is a two family. They would have charged me a premium if I wasn’t planning on using it as my primary residence, and if I was renting it out. If you use a local bank, like astoria, ridgewood, etc… you shouln’t have an issue with this.

mousta | 12 years and 6 months ago

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It really depends on who is underwriting the loan. If you end up with someone on the underwriting side who is actually looking at each specific situation as opposed to stamping whatever is on the paperwork then yes. There are many local mortgage brokers who have experience wiht this. My underwriter did ultimately view my 3 family as a 2 family. It has no C of O either. I was also not charged any premium for a 2 family. I used Ryan Pratt at DE Capital Mortgage with Wells Fargo as my lender.