21
Oct
By Mike Pfefferman
Mortgage Tips

Why Unpermitted Renovations Can Create Problems During Mortgage Approval

A remodeled kitchen, converted garage, or added bedroom can make a home look more appealing. But a beautiful renovation does not always tell the full story. If work was completed without permits that were required locally, buyers may encounter questions during the appraisal, inspection, or mortgage approval process.

What Does Unpermitted Work Mean?

Building departments often require permits for certain structural, electrical, plumbing, and other improvements. Requirements vary by location and by the type of project. Replacing cabinet hardware may not require approval, while moving load-bearing walls or adding living space often does.

Unpermitted work means a project was completed without obtaining a permit that should have been issued. It does not automatically mean the work is unsafe, but it may mean that required inspections and documentation are missing.

Why a Lender Might Be Concerned

A mortgage lender evaluates the property securing the loan, not just the buyer’s finances. If an appraiser observes a questionable addition or conversion, the lender may ask for clarification about the home’s condition, legal use, and marketability.

For example, a garage converted into a bedroom might appear in the listing’s square footage even though local records still describe the space as a garage. A lender may need to know whether that space can be counted as living area and whether it creates a safety concern.

The response depends on the particular improvement and mortgage program. Some issues may require documentation or repairs; others may not prevent financing.

Square Footage Can Be Misleading

An attractive addition may increase usable space without increasing the area an appraiser can recognize under applicable measurement and appraisal standards. Buyers should compare listing information with public records and ask questions when the numbers differ.

A seller’s claim that an improvement added substantial value is not a substitute for an appraisal. The market may value the space differently depending on its quality, legality, and function.

What Buyers Can Do Before Closing

Ask the seller for permits, final inspection records, contractor information, and any documentation related to major improvements. If records are unavailable, discuss the concern with the appropriate local authority and qualified professionals.

Tell your mortgage professional about questionable renovations as soon as you discover them. Waiting until the final stages of underwriting can create avoidable delays.

An unpermitted improvement does not automatically make a home impossible to finance. The key is understanding what was changed, whether it meets applicable requirements, and what documentation the lender needs before moving forward.

20
Oct
By Mike Pfefferman
Mortgage Tips

Can You Finance a Home That Has a Second House on the Property?

Finding a property with two houses can feel like discovering a bonus. The smaller home might provide space for relatives, visiting friends, or future rental income. Before making plans, however, buyers should understand that financing a property with two residences may be different from financing a typical single-family home.

Start With How the Property Is Classified

A detached second house is not always treated the same way as an accessory dwelling unit, commonly called an ADU. Local zoning rules, permits, separate utility connections, and the property’s legal description can influence how the additional structure is classified.

Some properties have a main residence and a smaller permitted ADU. Others contain two independent houses, perhaps built decades apart. A lender needs to know what is actually being purchased rather than relying on a listing description that calls the second structure a guesthouse.

Mortgage Programs Have Different Rules

Loan programs can have different standards for eligible property types, number of dwelling units, and acceptable accessory structures. A property that qualifies under one program may require a different approach under another.

The lender may review whether the homes are on the same legal parcel, whether both can be occupied independently, and whether the second structure has appropriate permits. If the property is considered a two-unit residence rather than a single-family home with an ADU, financing terms and documentation may change.

Appraisal Questions Matter, Too

The appraiser must evaluate the property in its current condition and determine how the additional residence contributes to market value. Finding comparable sales can be difficult when few nearby properties include two houses.

Buyers should not assume that the second home adds its full construction cost to the appraised value. Its legal status, size, condition, and usefulness to local buyers all matter.

Ask About Income and Future Use

A buyer may hope to rent the second residence to offset monthly expenses. Whether anticipated rental income can be considered for mortgage qualification depends on the loan program, documentation, and the buyer’s circumstances. Income should never be assumed before the lender confirms eligibility.

Before making an offer, ask for permits, floor plans, utility details, and records describing the second structure. Share them with your mortgage professional early. A property with two houses may offer valuable flexibility, but confirming how it will be financed is the best way to keep that opportunity from becoming a closing surprise.

15
Oct
By Mike Pfefferman
Mortgage Tips

Why a Mortgage Lender May Question a Property With More Than One Parcel

Imagine finding a beautiful home that comes with an extra piece of land next door. Perhaps the additional lot provides more privacy, a larger backyard, or room for future improvements.

While this may sound like an attractive bonus, purchasing a home that includes multiple parcels can introduce mortgage questions that buyers might not expect.

What Does It Mean to Have Multiple Parcels?
A parcel is a legally identified piece of land, typically assigned its own property identification number by the local taxing authority.

Most residential properties consist of one parcel containing the house and surrounding land. However, some homes are marketed with two or more parcels that are being sold together.

For example, a seller might own a house on one parcel and an adjoining vacant lot on another. The two properties may function as one large yard, even though they remain legally separate.

This distinction can matter when a buyer applies for mortgage financing.

Why the Property Configuration Matters
Mortgage lenders need to understand exactly what property will secure the loan.

When multiple parcels are involved, the lender may need to determine whether the parcels can be included in the same mortgage transaction and whether the arrangement meets the loan program’s requirements.

Questions may arise about whether the parcels are contiguous, how they are legally described, and whether the additional land has separate development potential.

The lender may also review whether any parcel contains improvements, structures, or uses that could affect residential financing eligibility.

Simply advertising two parcels together does not automatically mean they can be financed as one property.

The Appraisal May Require Additional Review
An appraisal evaluates the property being offered as collateral for the mortgage.

When a home includes additional land, the appraiser may need to determine how that land contributes to the property’s overall market value.

A separate parcel does not necessarily increase the appraised value by the amount a buyer might expect.

For example, an adjoining lot with limited access or development restrictions may have a different market contribution than a parcel that can support another residence.

Comparable sales and local market conditions help determine how the additional land is valued.

Consider the Long-Term Implications
Buyers should also understand whether the parcels receive separate property tax bills, have different zoning classifications, or carry individual restrictions.

If they eventually want to sell the vacant parcel separately, they may need lender approval or a partial release of the mortgage lien, along with any required local approvals.

Before making an offer, buyers should ask for the parcel identification numbers, legal descriptions, and available property records.

Owning extra land can provide valuable flexibility, but buyers should confirm how that land affects their financing and future plans. Understanding the legal and mortgage implications early can help prevent unexpected complications before closing.