Zoning Causing Losn Issues: Buying House with Detached Guesthouse

[Clint McAllister]

Hey all,

I am currently under contract and ran into a big curveball weeks into my purchase. I’ll explain:

I am currently renting a house in St Petersburg, FL with a detached garage/apartment on the property, which my landlord uses for AirBnB.

Recently, my landlord came to my girlfriend and I saying he wants to sell the house. After some thought, we figured we would offer to just buy it from him, with the idea in mind that we could supplement much of our mortgage with the detached guest house.

After lots of conversations with a lender, I was pre-approved for the ~$300K the owner wants, and I was able to work out a Conventional loan with 5% down, owners pays 3% towards closing costs (he’s a good guy and agreed). My dad also agreed to co-sign with me because, well, Covid-19 currently has me out of my second job temporarily.

With all this seemingly worked out, my dad and I sign the contract for the house purchase, sign the loan application, and have an inspection done last week. I also dropped a check off to the title company.

Now here’s the real knife to the heart- I get a call this morning from my lender telling me that my the property is zoned as a multi-family home (duplex) and not a single family home... meaning that I can no longer do a conventional loan with 5% down. The MINIMUM is now 15% down, or $40,000+ ! There is no way that can happen.

And forget about FHA, since my girlfriend is currently not working till further notice.

Why this wasn’t brought up much earlier in the process is beyond me. It took getting it to the underwriters this late in the game to inform me of this situation.

So the question I have now is, is there any way around this apparent rock-solid rule of 15% down? Or maybe even more realistically, could my landlord contact the county and have the property rezoned into a single family home so that my original down payment of 5% could work? I’m truly devastated about this situation and really don’t want to lose this house.

Thank you for reading!