You’ve just hit the open house circuit and found a great loft like the one pictured at 25 Lucerne #1 in SoMa. You want to write an offer and you’re preapproved—a no brainer, correct? Not necessarily, according to my colleagues at Guarantee Mortgage.
A majority of lenders have recently become concerned about “buyback” issues. For example, a lender makes the loan, sells it to Fannie Mae or Freddie Mac, and then is asked by the latter institutions at a later date to buy back the loan because of the live/work nature of the property. Fannie Mae and Freddie Mac are primarily concerned with such restrictions affecting the future value of the property.
As a result, lenders are avoiding lending on live/work properties.
It’s important to know what you’re dealing with. Only “true” live/work lofts are a problem; you identify these by looking for deed restrictions in preliminary title reports and within CC&Rs (the docs that govern the HOA).
Guarantee Mortgage reports that it has at least four lenders willing to lend on live/work projects with deed restrictions. One lender will do so as long as the building meets certain basic Fannie Mae condo requirements. Another lender featuring adjustable and interest-only loans will consider live/work loans on a case by case basis. Yet another two require 30% or 40% down.
So you can see how important it is to get lender clearance up front before you write your offer.