Certificate of Occupancy
Surprise! It's a Barn!

I've often been asked if a certificate of occupancy (COE) if necessary when refinancing a mortgage. Usually the question is associated with an atypical remodel. But the following story stands out in my mind as the most unorthodox! It was an extremely stormy day. My appraiser walked back into our office with a dazed look on his face.

"Kate," he complained, "I've been out mucking through the mud and can't find your client's house. There's only a barn at that address."

I thought back to my first conversation with the homeowners. "We just finished our remodel. Will we need to provide building permits, Kate?" they had asked me.

What IS That Property You're Refinancing?

Back then I worked for a bank famous for not being a stickler over excess paperwork, older building permits included. But as it turned out, my borrowers were refinancing a barn they'd just converted to a modern loft, skipping over the entire building permit process.

To top it off, they were already living in the barn-converted-into-a-loft! But not only that, the exterior was never remodeled. It was still 100% barn!

Residential Construction and Final Permit Process

During residential construction, government agencies issue permits to certify compliance with local building codes at designated intervals. When the house is finished, a final permit (COE) indicates that the house is complete and safe for occupancy.

For new construction, lenders require a final certificate before closing the mortgage transaction.

Mortgage Refinance and Certificate of Occupancy

But when it comes to refinancing an existing mortgage, is a final building permit required following home improvement projects?

Easy answer: Sometimes. It all depends on the...

  • Extent of the project, major remodel or minor cosmetic.
  • City, county, and state where the home is located.
  • Guidelines of the loan program, for example, FHA.
  • Specific lender requirements.

Comparing Home Mortgage Lenders

When it's time to compare mortgage rates and lenders for your refinance, be upfront. If you remodeled a barn, you remodeled a barn, right? Don't try to sweep the project under the rug, hoping the lender won't notice that the modern loft used to be a barn.

The fact that my homeowners were living in an unpermitted loft that used to be a barn was a pretty hefty surprise for my appraiser.

The time to ask about final permits is BEFORE applying for your home mortgage refinance. It would be even better to inquire before you start the remodel. Just as important, make sure the originator understands the extent of the project.

Ask Kate

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