Residential or commercial loan

[Jody Ho]

I am under contract on a multifamily house. The house is marketed as 5-plex (Original owner did the conversion in 1950, with the certificate of occupancy), but most of the things were not fully updated to 5 units. Two units are sharing electrical circuit and panel, water heater, etc. In the county record, this is showed as a 4-plex. I did go to the city to clarify the status, they said it is not uncommon to have this kind of mismatch.

My question is about mortgage/loan on the property. Since 1-4 unit multifamily can use residential loan but 5+ unit will fall into the commercial side. In this particular case, will it qualify for residential loan? What does the bank or appraiser look for to confirm this is a 4-plex or 5-plex?

Thanks in advance

[Rod Stanback]

@Jody, a 5+ unit property is considered commercial. The appraisal will verify the correct zoning for the property and list it in the report.

You can certainly obtain a bank loan for this type of property if it’s stabilized but it can take 60-90 days. Using soft money will get your competitive rates as low as 5.375% and a closing time as quick as 2 weeks, depending on the lender.