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Problems Financing Live/Work Units?

June 30th, 2009 · Comments · By Matt

A reader writes in wondering if others have struggled with financing a live/work unit:

Out of curiosity and based on a recent experience, have you ever heard of people having difficulty closing on a live/work condo? I was recently denied based on the condo being classified by the HOA as live/work despite the zoning being residential.. It’s a shame if this were common, quite a few of the condos in the style we like (i.e. high ceilings/exposed ducts/concrete etc.) are live/work so that would limit our choices considerably.

Any readers have any experience with this?

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  • Robert
    Yes. In general, banks are reducing their portfolio of lending....anything outside the norm of fee-simple, primary residence, single family for a person with great credit and substantial income (relative to home value) and 5-20% down is more challenging to find. Particularly the larger banks who are 'formulating' what they will/won't lend. Smaller, local banks who may not resell the mortgage will be more likely to finance.
    Don't get me started on condo's. They bring on a whole other set of challenges.

    We build live-works and are continuing to look for lenders. They're out there...just hard to find.
  • lemons
    No loan for a unit in a condominium that has >20% non-residential use or a single entity owning >10% is conforming under current FNMA rules. That means no live-work, no small buildings, no new development, no mixed-use, no street-level retail in many cases, etc.
  • Robert
    Yes, everything you say lemons is correct. But there are local lenders, smaller banks that are warehousing their own loans based on a "real" evaluation of the property rather than a government/bank formulated rejection. These loans don't need to meet HUD guidelines because they don't intend to resell to Fannie/Freddie.
    The trick is finding one of these lenders & getting them to do more than just a few units....
  • GoCougs
    If you are truly going to use a live/work loft for work...there are many SBA program loans available. I know first hand of industrial users who have purchased warehouses in the past few months via SBA loans when they couldn't get traditional financing through a lender.

    The catch is that you must be an operating business with viable plan, etc...
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