Posted by David Butler on July 17, 2010 at 17:39:53:
There are several issues in the mix here, with the zoning being perhaps the primary one. Another issue that you and/or the lender are silent on here is your own income qualifications, in the absence of rental income being included. Those two items play off each other.
Generally a lender isn’t in the business of policing local zoning, per se, outside of verifying the property is zoned correctly for the type of loan being applied for. But, if the property is not properly zoned for the actual usage, most conventional lenders, particularly if writing to GSE (Fannie/Freddie, etc.) conforming guidelines, won’t count the rental income toward your total income for the critical debt-to-income ratio they need to use in qualifying you for whatever loan amount you are seeking.
So… something seems to be missing in the information you are providing here. I would start by being very sure of the zoning, and the zoning regulations themselves, so far as the effect the property specifically. Then I would get clear answers from the lender to get firmer specifics. Is it the zoning, or is it the change in DTI that will occur if your rental income is not included in your total income?
If you can’t get more detailed specific answers, you might be well advised to get with a local mortgage broker and go through your circumstances with him/her. See whether they have the same issues, and more importantly, will they be more specific in addressing them. More importantly, if they are not able to place your loan with a conforming conventional lender, try to find out if they have a lender who will take on a nonconforming loan such as this.
Again… I have a nagging hunch the income picture is the more likely problem here. That can be a deal killer, particularly in view of the stronger federal legislation that is just coming into play with regard to lenders obligations to assure that the borrower can reasonably qualify for the loan - if that borrower occupies the property as their primary residence. If they can’t count on that rental income due to the zoning issues, and you are otherwise short to qualify, you’ll have a tough row to hoe. So get to the bottom of that as your starting point.
Hope that helps, and best wishes for your success.
David P. Butler
Nascent Equity &
Hotspur Investment Group