Hello, we are looking to buy a house with an FHA loan. The lender that we are using is worried that the "bonus building" on the property could prevent us from getting the loan. We were originally going for a USDA loan, but he said the building would definitely be a problem with that, so we switched, and now he is saying it could still be an issue. I was wondering if someone here could give us some more insight.
More info about the building: It makes up a very small portion of the property; the house is the main percentage. The building has electricity and its own meter, but no water, no bathroom. It is a one-room building with a bottom level for storage. It does have its own house number, but from what I can tell online, it's not a postal address, I guess, because it only shows up in certain places. The current owner is running it as a store and has a business license, but we have no plans to if we are able to buy the property. It is also zoned residential, not commercial.
ETA: Current owner has VA loan if that is relavent. I don't know how things translate between loan types.
FHA Loan for house with "bonus building"
byu/Succu6us66 inRealEstate
Posted by Succu6us66
3 Comments
That bonus building sounds like it’s creating an ADU situation which can definitely mess with FHA loans. The fact it has its own electrical meter and house number is probably what’s spooking your lender – they might see it as a separate dwelling unit even if it’s not being used that way
Your best bet is probably getting an appraisal that specifically calls it out as storage/workshop space rather than living space, but honestly might be worth shopping around to other lenders too since some are more flexible with this stuff
Where you’re going to have trouble is the zoning. If it’s zoned residential, loan approval will likely require it to conform to that zoning. I think that means that the extra building will have to meet the FHA inspection requirements of a residential building. I don’t believe the current use has any impact. Does the second building meet the local requirements to be used as housing? Could it be considered an ADU?
State?
Even though you don’t plan to use it commercially, FHA will look at what the property is at the time of appraisal, not just what you plan to do with it.
It believe that all business activity will have to stop and the business license cancelled before you close, but to be safe I would do it before any appraisal is done. I could be wrong though- so I would ask the lender.