House Hacking - 5% Conv Loan, Primary Res w Cottage - Not Poss?

4 Replies

Hey Pocketeers!

My wife and I are making our first step from getting out of our early twenty mistake of buying a luxury home with land and moving into a house in downtown Colorado Springs. It will be our first stepping stone to building a portfolio of rental properties as we adopt the nomad lifestyle to acquire our first couple properties. 

Here is where we are getting conflicting information and worried about everything going smoothly.

We are buying a single family residence that has an accessory dwelling downtown where it is quite common for the old school mother-in-law cottage to be in the back. As I was shopping for lenders, some were very concerned that we would not be able to do the 5% down conventional loan and yet others are not concerned since the county website has the it recorded as a single family residence and a cottage. The lot is zoned C5 and not R2 so that confused me a little too. The property has two mailboxes and named the back house with another address number.

Anyways, how do we make sure we aren't going to have our whole master plan fall apart when we get to the closing table? I figured we were well on our way to financial freedom and now I'm worried a bit that we might not be able to fund the deal!

Here's a pic of the house: 



I saw that on the MLS, super cute house. I own a house/cottage as rentals and my lenders treated the property as a single-family. Just make sure your lender is aware of the situation and you shouldn't have any problems. The C5 zoning doesn't matter to the lender, but could be good for you down the road if you keep this as a rental, and decide to do something else with it. Don't use an online mortgage lender, find someone local. I really like FirstBank.

 @Gretchen Place :

Gretchen, thanks! We really liked it and decided to make a move instead of just talking about real estate (like we have the past year or so). The real upside will be that I will be able to walk to work three blocks away and my wife's hospital RN job is only a mile away.

We plan to airbnb the cottage and practice learning and hopefully mastering that side of the business. We will have two roommates in the main house with us and live for almost free until we move out and on to the next one. 

I just got pretty worried when an online lender turned me down after looking up the house and saying that he would need 15% down. My local credit union still thinks everything will be fine since the house is listed as SFR on the Assessor's site and on the listing. Hopefully the appraiser feels the same way.

I guess my big takeaway or question from this is how can it be up to the appraiser for what he thinks he should call it? Can I be on site when the bank sends the appraiser or is that illegal? 

You or your realtor can be there with the appraiser. Might be better for the realtor to be there. 

Have you considered looking into traveling nurses for the cottage? I wonder if your wife could contact the person who hires them at her hospital. The advantage is that they already have background checks, etc. 

@Michael Vialpando you need to find a lender that has done investment / owner occupied loans. They KNOW the answer and can tell you the scoop. The search feature is helpful to locate people. Put in your zip code to find the ones in your area. You can then see the ones that have participated on the forums and see if they know what they are talking about. If that doesn't lead to satisfactory results, find another house hacker who bragged in the past few months and reach out to them and see who they used. Best results, generally come from a local mortgage broker who knows the investment angle.

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