Living in a Primary home that has a commercial loan on it

[Adam Soyak]

We are getting our first commercial loan on a property to initially rent out. It is zoned single family but there are 2 dwellings. We intend on renting both units out for minimum of 1 year before we move into one of the units. Has anyone had a commercial loan before where they occupied one of the units as a primary (house hack). We are concerned that the bank may call the note due, when we lose the income to one of the units. The income on one of the units will only cover 66% of the overall PITI. This bank requires us to file an annual income report for the property. We are aware that if we get a conventional primary loan on the property that we cannot use the income from the one unit due to the single family zoning.

Looking for advice or suggestions.  Thank you in advance!

[Erik Estrada]

Quote from @Adam Soyak:

Quote from @Erik Estrada:

Quote from @Adam Soyak:

We are getting our first commercial loan on a property to initially rent out. It is zoned single family but there are 2 dwellings. We intend on renting both units out for minimum of 1 year before we move into one of the units. Has anyone had a commercial loan before where they occupied one of the units as a primary (house hack). We are concerned that the bank may call the note due, when we lose the income to one of the units. The income on one of the units will only cover 66% of the overall PITI. This bank requires us to file an annual income report for the property. We are aware that if we get a conventional primary loan on the property that we cannot use the income from the one unit due to the single family zoning.

Looking for advice or suggestions.  Thank you in advance!

 This is actually going to be difficult to get passed by an underwriter (if you don't own any other real estate). 

But if the intention is to use it as a rental property for 1 year, and then occupy it, why not just refi back into a primary residence loan? Commercial loan rates tend to be higher than a primary residence loan (depending on the term). Also many will have a prepayment penalty so be mindful of that. 

 We own 10 other single family houses so hopefully that helps.  Once we go primary loan, we cannot count the additional income from the other unit because it is zoned "single family" even though it has two separate dwellings.  Commercial at this time has better rates and fees...but you are correct with the prepayment penalties.

 It depends on the type of commercial loan, 

If it's a 5-10/6 ARM you could get rates in the 5s at a 65% LTV, but it's a full doc loan.

If you don't show any income, and want to go DSCR, rates are higher, 7-8.5 on a 30 year fixed.