Financing a “unique” property

A man’s house may be his castle, but if it is really a castle, he will have a hard time getting a mortgage for it – mortgage lenders are reluctant to buy “strange” properties.

Why the aversion to castles and other unique types of houses? Because unique properties are a challenge to appraise and lenders should anticipate the possibility of foreclosure every time they approve a home loan. Unique homes are difficult to unload during foreclosure sales.

Think about it: if your home is the same as 99 others in your neighborhood, all of which are modest in size and recently sold for close to $ 250,000, odds are your home is worth around $ 250,000 as well.

But what about that ten acre land nearby with a manufactured house and a few barns on it? Find the value of this can become difficult.

If you are paying cash for a single house, it doesn’t matter how weird. If you are financing with a mortgage, however, you will want to plan ahead.

Here is a list of the most frequently rejected properties and what you can do to borrow against them.

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Mortgages for homes with an “extended square footage”

Homes in rural areas, and sometimes in upscale suburbs, are often sold on large lot lots. In general, an “extensive area” is a total area greater than 10 acres.

However, even many with less more than 10 acres can be considered “extensive” when the area is much larger than is normal for the region.

Typically, a mortgage lender will authorize homes on large lots, but if the land has value, that value may be capped or not counted against the total square footage or value of the property. A 20-acre house, for example, may only have “value” for 10 of them.

Reducing square footage lowers a home’s value and may require you to increase your down payment. You might also have difficulty refinancing your home in the future.

Be sure to ask your real estate agent if the total square footage of your home exceeds what is “normal” for the area.

Mortgages for green homes

Building a house with recycled tires, cola bottles or whatever is cool. However, eccentric materials or construction techniques – no matter how much they reduce your carbon footprint – can raise eyebrows at your mortgage lender’s underwriting department.

For the purposes of determining the value of a home, Fannie Mae’s advice to mortgage lenders reads: “On a case-by-case basis, lenders should determine whether there is sufficient information to form a reliable opinion of the mortgage. market value. “

Simply put, this means that lenders are discouraged from placing a value on a property without similar homes to compare it with. And, because “green houses” are rare, assigning a value to them is almost impossible.

Without value, there is no mortgage. Therefore, don’t build the only green house in your area and expect to mortgage it. Lenders will take a pass.

Log house mortgages

Financing a log house can be very simple or it can become a real headache, depending on two factors: the construction of the house and its location.

In areas where log homes are typical, such as northern Wisconsin, appraisers will often have little trouble locating sales near similar homes, making assigning a value to a log home quite simple.

In areas where log homes are scarce, however, assigning a value can be a challenge. Often, without comparable homes, an appraiser will reduce a home’s value, resulting in a larger down payment for the buyer.

Also note that using a log home kit to build your home may prevent you from getting mortgage approval. If you’re unsure whether your log cabin will qualify for a home loan, talk to the lender first.

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Mortgages for mixed-use developments

A mixed-use project is a building dedicated to both residential and commercial activity and at times it can be difficult to finance a residence in the project.

The classic example of a mixed-use project is a multi-story condominium with a commercial enterprise on the ground floor. As long as the area of ​​the commercial part does not exceed 25% of the total area of ​​the building, you should obtain financing.

However, for mixed-use buildings where commercial activities exceeds 25 percent, you might be out of luck.

The only exception to this rule is for loans through the VA Loan Guarantee Program. VA loans do not specify a specific limit for commercial space in a mixed-use building – only that the amount of commercial space is a “consideration.”

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Mortgages for “wacky plans”

For buildings with particular architecture, insufficient equipment or impractical layouts, finding fair market value can be a challenge. As a result, it can be difficult to finance homes like these.

It’s hard to list the characteristics of a ‘wacky floor plan’, but you’ll often know it when you see it.

For example, a house that requires guests to walk through the master bedroom to access a bathroom; and, a house where the kitchen and dining rooms are on different floors can be considered out of the ordinary.

Fannie Mae’s underwriting guidelines state that an atypical or functional floor plan restricts “the market’s appeal for the property.” Therefore, although the house may be financed, the value of such a house will be discounted.

So if you agree to buy a home for $ 250,000 and your plan is to bring 3%, or $ 7,500, to closing via the HomeReady ™ mortgage program, but while the atypical floor plan lowers the home’s value to $ 200,000, your down payment would rise to $ 56,000.

That’s $ 50,000 for the difference between the purchase price of the home and its value, plus another 3%, or $ 6,000, of your HomeReady ™ down payment.

Small home mortgages

When a property is small enough, it is no longer considered “a house”, which means that you cannot get a mortgage for it.

For a mortgage lender, the typical minimum size for a property to be considered a home is 400 square feet. In addition, the house must also rest on an approved foundation, be taxed as real estate, and be built in accordance with local building codes.

If the accommodation is not considered real estate, you probably cannot give it a mortgage. However, you may be eligible for manufactured home financing through the FHA. Talk to a mortgage lender to find out about your options.

What are the mortgage rates today?

When you want to mortgage an unusual house, you might not be successful with the first lender you talk to And remember: just because one lender says ‘no’ the others won’t say not “yes”.

Get Mortgage Rates Live Today Now. Your Social Security number is not required to get started, and all quotes come with access to your live mortgage credit scores.

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