Residential used as commercial

[Miguel Torres]

I am interested in purchasing a property in PA. It is zoned as residential with special use designation (Used as an office). I called my lender and wanted to put 50% down and finance the other 50%. all was well until he looked up the images of the property and seen that it was an office during its last use. He told me that although it was zoned residential that it may appraise for its “best and final use as commercial”. Meaning his company could not finance it.

My problem is if I go to a commercial lender would they say the same thing in the opposite way? (It was used for commercial but zoned residential so they cant finance). Also how different are the requirements/terms of commercial lending compared to residential? I don’t want pay crazy interest on a residential property just because of a special designation if I don’t have to. 

All help is appreciated.

[Kenneth Garrett]

@Miguel Torres

It sounds like you have a residential property with a Special Use to allow an office use. The use of the property is commercial. If your going to continue to use it as an office then you will need commercial financing. Interest rate about 1% higher than non owner occupied residential. You will need a DSCR of at least 1.25. Will need to own it in an LLC or other entity. Will need EIN number from the IRS. I've done many commercial loans on residential properties. Talk to a small local bank in your area. You will get the best terms and they want to lend in the neighborhood.