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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 11.08.2018

Dear Mimi,

I understand there might be some confusion regarding your situation. It's important to know that it's not common practice to outright "deny" someone an appraisal. Based on what you've shared, there's a possibility that the appraiser or loan originator assessed the situation and concluded that the property wouldn't align with HUD's property requirements. They likely aimed to prevent you from incurring the expense of an appraisal for a property that wouldn't qualify.

One key point to remember is that HUD has specific guidelines regarding properties with certain features, such as basements with kitchens, which may not be insured under certain conditions. For instance, if your property includes an addition like a basement apartment that isn't allowed by local zoning laws, or if you have a duplex with an unpermitted accessory dwelling, it wouldn't be eligible for a reverse mortgage.

The intention behind not proceeding with the appraisal was likely to save you from spending money on a process that wouldn't benefit you, given the eligibility constraints.

However, there are steps you can consider addressing these issues:

If your home is a single-family unit, the basement apartment doesn't violate local zoning laws, and everything was built according to code, you should explore getting the addition officially permitted. This process can involve inspections and potential modifications but has been beneficial for many homeowners in enhancing their property's value. For example, some have managed to get their additions permitted for under $1,000, even after accounting for the necessary repairs following inspections.

If permitting the addition isn't feasible, another option could be to remove the kitchen from the basement, which would then classify it as a finished basement without a kitchen, making it acceptable under certain conditions. This, of course, depends on the specific regulations of your local zoning authority.

It's crucial to first check with your local zoning office to understand what's permissible. Removing the kitchen might be the only pathway to qualify for the loan if the addition cannot be permitted as is. On the other hand, if permitting is an option, you'll need to evaluate the required work and costs to decide if it's a route you wish to pursue.

This clarifies the situation and gives you a direction on how to proceed. Please feel free to reach out if you have any further questions or need assistance navigating these options.

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