Mixed use properties are properties that are used for residence and business purposes and are usually zoned in commercial areas. Although obtaining financing for these types of properties is not as easy as a standard single family residence there are lenders that will. However, there are many things to consider when purchasing or refinancing a mixed use property.In addition to your credit scores and income, lenders will also look at the DSCR or Debt Service Coverage Ratio. This is simply how much income the property is generating vs. the amount of your mortgage payments and business expenses.
Many banks do not lend on "Mixed-Use" homes because Fannie Mae (FNMA) and Freddie Mac (FHLMC) do not purchase mortgages secured by Mixed Use properties. Lender banks must find other investors or keep these loans in their investment portfolios for the duration of the loan term. As a result, loans secured by Mixed Use buildings are deemed to have less liquidity. For this very reason, Mix Use loans have higher interest rates than Conforming mortgages.
One determining factor for lending on Mixed Use is if the nature and primary purpose of the property is for residential use. The commercial use should not exceed 20% of the total living area, this includes agricultural use.
You may be able to qualify for an FHA 203k loan for a mixed use property if you need to finance repairs to the residential portion of an owner-occupied property. These terms will generally be better than most commercial loans.
