We follow FNMA’s guidance when it comes to properties that have a business-use in addition to their residential use, such as a property with space set aside for including but not limited to, a day care facility, a beauty or barber shop, or a doctor’s office. The following special eligibility criteria must be met:
- The property must be a one-unit dwelling that the borrower occupies as a principal residence.
- The borrower must be both the owner and the operator of the business.
- The property must be primarily residential in nature (over 50% residential use), AND
- The dwelling may not be modified in a manner that has an adverse impact on its marketability as a residential property.
The appraisals for such properties must include All of the following requirements:
- provide a detailed description of the mixed-use characteristics of the subject property;
- indicate that the mixed use of the property is a legal, permissible use of the property under the local zoning requirements;
- report any adverse impact on marketability and market resistance to the commercial use of the property; AND
- report the market value of the property based on the residential characteristics, rather than of the business use or any special business-use modifications that were made.