When is a 2 unit a 2 unit?

July 7th, 2010

When is a 2 unit a 2 unit? A 2 unit home, sometimes referred to as a duplex, is a home where there is a rental unit, usually in the basement. Over the years I have seen much confusion surrounding what officially defines a home as a 2 unit. I can tell you that an appraiser, banks and Fannie Mae (all the people that count when you need mortgage financing) will be looking for the following:

-Is there a Certificate of Occupancy (C of O) for the rental unit?

-Is there separate metering for the utilities for both units?

-Are there separate exterior entrances for each unit, in the front and rear of the home?

-Is there interior access to the lower unit from the upper unit?

-Is there a tenant currently occupying the lower rental unit?

If you have a C of O, with no interior access, with separate meters, separate entrances and a tenant, then you have a 2 unit.

If you have no C of O, with interior access, with common metering, with separate entrances, and a tenant, you have a single family home with an “in-law suite”.

There are numerous other variations I won’t bore you with. You may have some of the traits of a 2 unit and some of a single family with an in-law suite. It will ultimately be up to an appraiser to make the final decision, and the underwriter will interpret based on the appraisal.

It is important to know what your home may be called by a lender for several reasons:

-A 2 unit appraisal is more expensive than a single family with an in-law suite (by $150-$250).

-A 2 unit home can borrow up to $533,850 and still be called a Conforming loan, while a single family with an in-law suite can only go to $417,000 as a Conforming loan.

-A 2 unit home will be charged a higher rate, usually .25% in rate or 1% discount point higher.

-Some loan programs state that only single family homes (even with an in-law suite) are eligible, so a formal 2 unit may not qualify at all.

Obviously how your home is defined, if you have a rental unit, is very important. Make sure to ask your lender a lot of questions as to how your property may be defined, how it impacts your eligibility for whatever loan you are applying for, and if it changes the terms.


Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

Leave a Reply