Lending options for owner-occupant duplex

[Alan Grubb]

Hello,

I’m currently exploring options with my agent and lender for purchasing a duplex as an owner-occupant. What makes this situation interesting is that I cannot reasonably move into the residence within 60 days, unless one of the tenants agrees to vacate. Ethically, I do not want to try and convince one of the current tenants to vacate unless they would oblige and be compensated for their inconvenience. Legally, there is no way to get them to vacate as they have leases through November of this year. 

Here are my options right now:

1. Do a commercial loan instead of a traditional. I’d pay 25% down instead of 20% and I’d have an interest rate 1% higher - 4.5 instead of 3.5%. Then refinance after I become an owner occupant in November and get the lower rate. I’d have to pay closing costs twice in this scenario.

2. Do a residential loan, 20% down and 3.5% interest and then on the offer put an addendum that I will pay one of the tenants 6 months of their rent ($8100 at 1350/mo) to vacate within 60 days after closing. 

Option 1. is  not attractive enough for me to consider going through with. Option 2. I am considering. Are there any other lending options I might consider? I don’t want to play around with the 60 day occupancy clause on owner occupant mortgages. If it was ~15 days or a month that’d be one thing but 6 months is much too long to be considered reasonable.