Buying a second home across the street from mine

I live in a 1300 square-foot house 1 bath, with husband and 2 kids. I also have a home-based business making and selling jewelry that I run from the house as well. It’s a lot to fit into one house and the house across the street from mine has just gone up for sale. It is 900 sq. ft. I would like to purchase it as a way for Family to stretch out a bit. Have a second bath, etc. When I have spoken with mortgage lenders, they say that I would have to get an investment property loan. Even though this would be more of a second home. They say you cannot have a second home across the street from yourself. Even though this property will not be a rental or creating income for me. My my main question is, will be using this across the street property mainly as an art studio. It is a residential lot. Would I be breaking the law running a business in a house that I technically don’t live in? Also, must I really pay a higher interest rate because this would be considered investment property?

Asked on June 15, 2017 under Real Estate Law, Arizona

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

1) As to whether you can run a business in a home you don't live in, in your town--that's a local issue, under muncipal law (or possibly county law for an unincorporated entity which doesn't have its own zoning, etc codes). Every locality can set different rules in this regard--go to the town/city (or county, as applicable) clerk's office  ask which department (e.g. building; zoning; commerce; etc.) would have jurisdication over this question, then ask that department what the answer is. If they say it's illegal, ask them to refer you to the code or law in section, so you can read it for yourself and make sure that means what they say it means.
2) Lenders don't have to lend--there is no legal or constitutional right to a loan or mortgage. Rather, they choose to lend as their business, to make money, and are free to put any requirements or restrictions on their loans that they like. It is unusual, to have two homes across the street from each other--I can't remember ever seeing that, for example. While there is no physical or practical reason why, as an alternative to moving and buying a bigger house, a family might not adopt this strategy, because it is unusual, it is easy to see why a lender would treat it as an investment or commercial or income-producing property  (which it actually would be, if you will use it "mainly as an art studio"--it may look like a house, but it would mostly, in your words, be the equivalent of an art studio or office for your business, or primarily a place where you work and make money). And more to the point: since lenders can set any rules or requirement, etc. they like on loans, they are free to treat this as a commerical or investment property if they choose, just like they are free to charge higher rates on commercial or investment property. You don't have to agree with them, but they have the right to do this, so your agreement doesn't matter; all you can do is shop around for the best loan you can find.


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