Any ideas for getting around USDA/FHA guidelines on two kitchens? (loan officer, requirements)

[FreckleFace2]

Long story short...we fell in love with a property and were about to place an offer. BUT our loan officer told us the house won't get financed by either USDA or FHA because the upstairs has a second kitchen in it. This is a single family home where the owner had rented out the upstairs at one point.

Any ideas if it is possible to get around this guideline? (Conventional financing is not an option for us.)

Thanks!

[ShanetheMortgageMan]

It's not against FHA or USDA requirements for a home to have two kitchens... unless the city/county code department says it's illegal to have 2 kitchens in a single family residence, or has illegally been converted to a 2-unit, etc.. I'd check with the local building & zoning laws, if it's permitted, then FHA & USDA should be fine with it in my opinion. Lenders may have overlays not permitted single family residences with 2 kitchens, and it may pose some challenges when appraising.

[FreckleFace2]

We consulted with two loan officers - both said that this property would be considered a multi-family home so it won't qualify. We were also told that removing the kitchen still wouldn't make the property eligible. It would have to be sold as a commercial property.

Just to clarify...this is in a rural area and looks like a standard two-story single family home. There is a deck on the second floor with a separate entrance. You can also access the second floor from inside the home via a normal staircase. This is certainly not a two-family home. I guess I am just really perplexed at this point.

[ShanetheMortgageMan]

Multi-family for the sole reason it has two kitchens? And has to be sold as commercial property? I don't think so.

Looking at an appraisal from August of 2005 and the property is a normal SFR (built on the side of a hill), main floor has a kitchen, bottom floor also has a kitchen with a separate entrance, as well as a normal staircase running the height of the two stories. Appraised on Fannie Mae Form 1004, closed as residential. Not FHA though.

USDA doesn't allow multi-family properties, so I could see the two kitchen's perhaps being an issue for that program. But it'd be a stretch.

Is a second kitchen permitted? If so, was it created with permits? If the answer is no to both of those questions you'll have issues with any lender as the property would not be of legal use.

I'm not surprised you are having an issue, as I've heard of lenders not wanting to lend on properties with 2 kitchens in them, but it usually stems from the fear that the second kitchen wasn't set up properly with gas & water lines, etc. If it's of legal use, and has permits, and isn't too unique, then there should be a lender willing to lend on it.

[FreckleFace2]

Thank you for all this info, Shane! Sounds like we need to shop around for lenders. We may simply look for a more traditional property to avoid these issues. It's a shame!

[chet everett]

...honestly I have done deals with several homes in urban-ish, suburban, and rural areas that were done with FHA financing and had been setup at one time as multifamily homes but were going SFH.

USDA is different story altogether.

If your lender does not understand the different requirements you need a new lender, but in either case the sticking point SHOULD NOT BE the features like kitchens and access, as the BORROWER is the one that will be responsible for any funny business after the sale...

[beachmouse]

The second kitchen thing in single family apparently isn't too weird in parts of the Northeast or among some Jewish subgroups who are extra strict about keeping kosher. If you can find a lender who knows those kinds of contexts....