Hunting the Loan

The past month we’ve been searching for a mortgage loan.  While we’ve already closed on the place with a temporary loan held by the seller, known as “holding paper”, within one year we have to replace this with a bank mortgage.  We’ve started the search with a half dozen sources, only to find that lenders, particularly mortgage brokers, shy away from loans on mixed use buildings.

Recently we learned of Housing and Urban Development's 203(k) loan program.  It's designed to encourage the creation of housing units as well as renovations of existing buildings.  The 203(k) is flexible enough for our situation, allowing us to convert the building from straight commercial to mixed use, which will include retail and offices as well as our apartment.

The main drawback of this approach is we’ll need another, albeit smaller, loan to cover the renovation costs of the commercial part of the building.  This portion wouldn't require as much money and will hopefully be affordable if we tighten our belts - not a bad compromise for getting this building fixed up and usable.

The next steps will be to start on the loan submission documents and see where that takes us.  In the meantime, here are sketches of a couple versions of the preliminary design.