Lender Thought My Two-Unit Was a Single Family

[Art Maydan]

I’m under contract for a two-unit I found off the market. The seller converted a single family into a two unit and did a gut rehab. The appraisal was ordered yesterday and I called my lender and asked him to give me the square footage when the report comes in because the people who want to rent the first unit from me (I’ll be living in the second) want to know.

He didn't know it was a two-unit and was proceeding as if I'm buying a single family this whole time. We were going to do 5% down conventional. Now, he says I need to put down either 15% or go FHA, which the seller doesn't want to deal with. I can probably swing 10% if I borrow some money. I can not do 15%. What can I do?

[Jake Thomas]

FHA or 15% down is right for a owner occupant multi. Had a client run into a similar situation buying a 3 unit.

Why won't the seller go FHA? Is this a really old house with a bad roof or obvious lead paint? FHA isn't as bad as people think, most properties will pass without issue.