If I purchase a single family house with an illegal apartment will it affect the banks mortgage decision?

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I am interested in purchasing a single family house on Long Island, NY which currently has an illegal apartment upstairs with a kitchen with a stove, sink and refrigerator. When the appraiser comes to look at it and notes the upstairs kitchen, will this affect the bank’s decision on whether or not to give us the mortgage loan? If so, is it possible that we can just disconnect the stove and somehow cover up the sink when the appraiser comes? What about the fridge? is that also illegal? Please help!!
Im not even 100% sure if the kitchen upstairs is considered illegal. I know the house is a single family house and Im pretty sure you are not supposed to have gas pipes going up the stove up there, and im not even sure if the sink and refrigerator are aloud. I was thinking of disconnecting the stove and hiding it but do we need to do the same for the sink and fridge?

  1. Reply
    April 29, 2011 at 10:37 pm

    I’m not sure what you mean by illegal apartment. It’s probably legal for you to have all these fixtures, it’s just illegal for you to rent it out? If so, then it wouldn’t affect their decision at all.

  2. Reply
    April 29, 2011 at 10:50 pm

    I don’t know for a fact, but unless someone comes in and says the apartment is not up to Code, then maybe it would affect their decision, becuase of the cost of repairs to bring it up to code.

    Appraisers don’t usually have anything todo with that, that is usually up to a home inspector to decide if something is up to code or not.

  3. Reply
    April 29, 2011 at 11:28 pm

    The bank will likely add 75% of the rental income to your income figures if you provide proper documentation to the underwriter. This will allow you to qualify easier for the loan.
    In valuing the property, the appraiser will likely call it as it appears. If there is a separate unit, it will be evaluated as one. However, sometimes the appraiser will refer to the public records and call it a single family dwelling. In which case the comparable sales selected for valuing will be single family homes and not duplexes. With appraisal guidelines tightening, it is highly likely that your property will be considered just as a single fmaily dwelling with “guest quarters”. That should give you an advantage of having additional sq. ft. so that yours can be compared to larger homes in the area.

  4. Reply
    April 30, 2011 at 12:24 am

    I’d speak to your mortgage broker and express your concerns. The problem I think you’re concerned with is whether this property will be considered a 2 family house with the illegal apartment. Depending on the approval from the lender the appraiser may not even have to enter the property if they only need an exterior appraisal. There are also other ways around this as well that your broker could help you with. Also, techinically as long as the apartment does not have a separate entrance it cannot be considered a multi-family home.

  5. Reply
    April 30, 2011 at 12:40 am

    It’s not an apartment, it is a place for your mother to stay when she gets older, or is all alone, or when you have guests that visit for a week or more. It is only illegal if you rent it out, not for family to stay in, and should improve the value. remember it is not a rental. I believe they used to be called mother-in-law apartments.

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