Question for mortgage/Real Estate Experts

My SO and I are trying to buy our first home. We have a signed sales agreement and are looking for a mortgage. We will be using the property as our primary residence, but the property has a small storefront that is presently used as an office. The property is zoned as a commercial property with dwellings. We wish to occupy one unit and rent the other. We have 20% cash to put down, good credit, 2 solid incomes, and very little debt.

All the lenders we have spoken to so far say that because there is a small storefront, this is a commercial property and Fannie Mae will not back this loan. Does anyone have any leads or advice about how to obtain financing? How can we find a company that writes and holds its own loans?

With money as cheap as it is now, we were expecting no problems, but approx. 20 banks have shot us down so far. Everything goes fine until I mention the storefront. I am trying to be as honest as possible and not misrepresent the property, so I mention it up front.

I sell commercial real estate for a living, and what you are describing is typically seen as a “mixed use” property by lenders. I’m not a residential financing expert, but I doubt you will be able to qualify for a convential residential loan (and thier more favorable rates and longer terms) with any residential lender if your intent is to rent the front section as an income property.

Commercial lenders would (should) be happy to craft a loan for you with 20-25% down if the property will appraise. The spread between commercial and residential rates is as small as it’s ever been. See a commercial lender.

I’m an Escrow Officer and I conduct closings/prepare settlement statements for a living…

I agree with astro’s assessment of the situation. A commercial lender should be able to help you. Many of the major lending institutions out there should have commercial lending divisions. It really surprises me that no one you have spoken to has offered to refer you to anyone.

And you are absolutely right to mention the storefront from the outset. The appraiser or an inspector would definitely mention it in their reports, and then you’d really have a nice mess on your hands if you hadn’t been up front about it.

Best of luck to you…hope you get it straightened out soon! :slight_smile:

Thanks very much for the replies. We did talk to a few people today who may be willing to work with us. If it would not be too inappropriate (or against the board rules), could you folks give me an idea about how much worse the terms are going to be? We did most of the math based on a 6%, no points residential mortgage. We are working within a pretty narrow time frame here, with people taking Friday or Monday off, we lose even more time.

Thanks again very much for the advice and kind words.

Hard to say, exactly… the rate you get depends very much on your individual situation (type of property, intended use, credit, size of your loan, etc.). But from the sound of things, you guys are in good shape (good credit, a good down, etc.). So I don’t see you getting quoted too outrageous of a rate.

Haven’t looked at it in awhile, but you might try checking out and seeing if they have any information there that can give you a ballpark idea.
If they don’t have anything there, I’m sure there are other sites on the web that might. Just remember though… nothing will be exact, as your situation may vary from the “model”.

Hope that helps!