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I was denied an appraisal for a reverse mortgage because of non-permitted work in my house, and the creation of a basement apartment with a kitchen and bath. Because of this, I couldn't complete the process. Is there any way I can qualify for a reverse mortgage despite this issue of not having gotten permits for the addition to my home?
By Mimi M. on 11.08.2018Dear Mimi,
I understand the confusion around your situation. It’s uncommon for someone to be outright "denied" an appraisal. However, based on what you’ve shared, it’s possible that the appraiser or loan originator preliminarily assessed your property and determined that it may not meet HUD’s property requirements. Rather than moving forward with an appraisal that could be costly and result in a loan denial, they may have tried to prevent you from unnecessary expenses.
Potential Reasons for Appraisal Issues
HUD has strict property guidelines, particularly regarding basements with kitchens, accessory dwelling units (ADUs), or zoning compliance. Some common reasons a property may not qualify include:
- A basement apartment or additional dwelling that is not permitted by local zoning laws.
- A duplex or accessory dwelling unit (ADU) that was added without proper permits.
- Features that could make the property ineligible for FHA insurance, which is required for a reverse mortgage.
What Are Your Options?
If your property is a single-family home, and the basement apartment does not violate zoning laws, you might consider:
- Getting the addition officially permitted – If your basement unit was built to code, you may be able to go through the permitting process. Some homeowners have successfully done this for under $1,000, even after making minor repairs.
- Removing the kitchen from the basement – If the basement cannot be permitted as a separate unit, removing the kitchen could classify it as a finished basement rather than an unpermitted apartment, potentially allowing it to meet HUD guidelines.
Next Steps
- Contact your local zoning office to confirm whether the addition can be permitted.
- If permitting is not an option, discuss with your lender whether modifying the space (such as removing the kitchen) would allow it to qualify.
- Evaluate whether the cost of modifications is worth it based on your financial goals.
This should give you a clearer path forward. Let me know if you have any further questions or need assistance navigating these options.
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