Mixed-Use Property Mortgages

Mixed-Use Property MortgagesMixed-use 2-4 unit properties are considered commercial properties by lenders.

There are no conforming mortgages on 3-4 unit properties but Fannnie Mae will purchase loan against 2-unit properties where the commercial space is occupied by the building owner’s business if the residential space is accessible only from inside the store and back door.

The FHA will lend against 2-4 unit, owner occupied (must live in one of the residential units) mixed-use properties if the commercial space is less than 50%.  It used to consider the value of all the units, not any more.  These days, it gives no value to the commercial space.

So, on a 4-unnit property where one unit is commercial and the other 3 are residential and where each unit ads $100,000 ($400,000 total) to the value, FHA will insure a loan against the $300,000 from the residential units only.

That means borrowers have to bring $110,000 (more than 25%) to the closing. A commercial loan would require between 25 to 35%, usually.  The rate on a commercial would be higher.  So, sometimes, it makes sense to go FHA, sometimes it does not.