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“the loan officer just informed me that I don’t qualify for a conventional loan because my house has an english basement”

by Prince Of Petworth August 16, 2016 at 1:45 pm 21 Comments

Photo by PoPville flickr user Clif Burns

“I would like to revisit this topic which was raised in July 2014 since I have the same issue. Link.

I am attempting to refinance a conventional 30 year mortgage with a lender to get a better rate and the loan officer just informed me that I don’t qualify for a conventional loan because my house has an english basement; specifically according to him the appraisal company classifies my home as a multi-unit property because there are “two kitchens” and no interior stairway into the basement. It seems like they wont budge, and looks like I am out the $425 appraisal fee.

Based on the comments to this topic two years ago that I’ve linked above, some people have successfully refinanced as along as they found the appropriate lender. I would love to get some help here, and hear from folks who’ve successfully refinanced. Any advice would be very useful.”

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  • Mona

    I actually own a real 2 units (duplex) and I refinanced with no issue with Amerisave however when trying to buy a house with basement recently I ran into that issue with a local bank. So it depends on who you use. Try Amerisave.com, it is mostly online but they send someone for appraisal and I didn’t have any issue. Good luck!

  • 9th Street Neighbor

    Any local bank that knows that market will call a rowhouse with an English basement (separate entrance, no access from upper unit, which would make it an “inlaw suite and not subject to this onerous “surcharge”) a “multifamily home” and most likely charge about .25 additional mortgage rate on the mortgage loan. I have been through this several times with my current rownhouse with my English basement.

  • Andie302

    Call Chris Jordan at First Home Mortgage. He is helping one of my real estate clients purchase a property with an English basement, and has helped previous clients refinance them as well. Plus he’s very responsive and wonderful to work with. Alternatively, go back to your current lender and ask them if it can be categorized as an in-law suite, or to refund your appraisal amount because he/she should’ve known that BEFORE they ordered and completed the appraisal. Good luck!

    • Anon

      I don’t think you can classify it differently if it is separately metered…

      • tcohen

        Not true. My house has two electric meters and gas meters because it used to be two units and we reconverted it back to one unit. The number of meters does not determine if it’s multi-family.

        • Anonymous

          Well i just went through this- dcra told me id have to subnit drawings and apply for CoO or remove the mete and put back in stairs. It sucked because DCRA has it listed as a single family, but Tax office has it listed as conversion.

    • K

      Everyone I’ve dealt with at First Home Mortgage has been very, very helpful and responsive.

  • anonymous

    I Just went through this on the sale of my home. The buyer was turned down from one lender, but tried with another lender it was successful. Because of the two kitchens and no interior staircase- they wanted something from the city showing it’s a sinlge family home. It’s listed as DCRA as a single family home- but they have NO paperwork to state that. They said it doesn’t have a CoO which is what makes the property a multiunit. Long story – they wanted the kitchen removed or staircase put back. There’s different guidelines between FHA/ Freddie Mac as well in regards to homes with accessory units(which btw is not legal yet in DC)

    • anonymous

      When I redid my other home- I kept the interior staircase to try and prevent this issue down the road. After sept 1 I think accessory units are will be legal in dc so that might make it easier to prove that it’s an accessory/dwelling unit- vs and multi-family(two-unit) home

      • Anon3

        This is a great discussion – I ran into some issues like this when i originally bought my house 4 years ago. The sellers were concerned it would appraise as a multi-unit (which requires more cash down, and thus limits the buyer pool) rather than a single family home. I will probably have to deal with this issue later as well, if or when i sell it. Without a connecting staircase, it’s hard to justify the basement apt as an in-law suite. I have a victorian with a basement (not renovated, but with connecting staircase – i plan to renovate in future), and a carriage house on top of the garage. I did renovate the carriage house – it’s an efficiency now. So i think that limits my ability to put a kitchen in the basement when i do renovate it eventually – can’t have 3 kitchens! So i will probably renovate it as technically a “rec area”, with a bar/ kitchenette space, but without an actual stove (use hot plates instead) – so it might be rentable/ livable if necessary, but without being officially a separate unit.

        • Anonymous

          Eh- i would probably still make it a rental. Install electric appliances. Can easily be moved out for appraisal and then put back in after. I have apartment now in basement(have interior stairs-but blocked off) but I am going to appy for garage/carriage house once accessory dwellings are allowed come sept.

  • anonymous

    We actually refi twice with two different banks, one was out of state bank and the other was Eagle Bank out of MD. We too did not have CoC AND did not have any tenants, so we told the mortgage company that we have in-law suite and neither banks, nor our appraisers had any issue with it.

    Have you spoken to the appraisal company? Just like you can appeal the appraised value, you might be able to convince them to change the classification if you ask them their source for classification definitions. Keep in mind, you may also be getting higher appraised value for multi-unit classification. If you need higher appraised value, you might want to look for another bank/appraiser.

  • jmarkman

    We were told something similar by two lenders before finding one (Caliber Home Loans) that didn’t have any issues with our set-up.

  • Moon

    I had the same issue, finally I refinance with the same bank. Once my tenant moves out, I am going to put back the stairs.

  • anon

    Had a C of O for a two unit on my place that came up during a refi. The initial loan wasn’t an issue, but that IMO was because the C of O for the previous owner had a typo and didn’t show up at the time. For the refi, I was able to get a 30-yr conventional, but the appraisal and loan conditions had a few requirements. They looked at rental potential for the entire house and required that the appraisal show 20% equity.

  • John

    I had a slightly different situation. Interior stairs, separate meter, prior owner had two COOs. I use the whole house as my own residence. This issue came up on refinancing and I was eventually able to get a 15 year mtg. at the originally proposed rate, but I had to negotiate down from two points added on (settled on 1 point) and had to demonstrate that I had 6 months of mortgage payments in the bank in cash on the day of closing. This was with Discover Loans and they sold the mortgage the day after I closed to NationStarMtg.

  • somey

    The issue isn’t that you can’t refinance, it’s just that most banks will apply different requirements to your loan, namely that your refinanced loan amount won’t result in a loan-to-value ratio greater than 0.75, instead of 0.80 for single unit homes. Additionally, the bank’s underwriting process likely will include verification of a rental stream from the English Basement unit unless your personal income (e.g., from your job) is high enough. You probably can find a few lenders who will go up to 0.80 LTV for a two-unit home, but they will charge you a substantially higher interest rate for doing so.

  • SWH

    I just purchased a rowhouse with separately metered basement (with CofO). I had to put down 25% and my interest rate was 1/8th of a point higher than the standard conventional rate.

  • oldtimer2017

    I purchased and refinanced twice a CH row house with an English basement, 2 kitchens, separately metered, and no shared stairwell. I used Wells Fargo and BoA. This issue was raised once and my broker straightened out the underwriter. Go find a more experienced broker.

  • OP Anon

    Serious question: why do banks consider homes with a separate unit to be higher risk? Which they obviously do if they are charging a higher rate and more onerous equity terms. The owner is occupying the other unit, so I don’t really understand why they charge a penalty rate. It’s clearly not an investment property.

    Do people with an accessory unit default at a higher rate than SFH owners? That does not intuitively make sense to me, at least in the DC market.


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