Need Financing Solution- Duplex with ADU

[Meagan Dupre]

Hi all,

I'm under Contract for a lovely duplex with ADU in San Antonio, TX. All was fine with our 20% down conventional loan until today when appraisal flagged it. Apparently a triplex is not the same thing as a Duplex with and ADU. Fannie and Freddie won't buy a Duplex with ADU (makes no sense to me). So here I am, twelve days before closing with no solution.

There is still an internal staircase, so the house could pass for a single family home if we removed the stove upstairs. However, there is a tenant in there. 

The property is zoned single family with a non-conforming use permit. And the city website has it inaccurately recorded as a single family home with two ADUs. 

I got a great deal and hate to put it back on the seller to deal with. They definitely have no clue that the property is not able to be financed (they paid cash 5 years ago).

The lender suggested a Non-QM Lender but it sounds shady. Does anyone have experience with a situation like this? Or if I get a hard money loan can it be refinanced?

This is my first investment and I’m so close to living mortgage free! Thank you all in advance for you knowledge.