The term is pretty much self-explanatory as it relates to property types. A two-on-one means there are two separate residences on the same lot. Not to be confused with a duplex, which is also two residences yet they are connected to one another, whereas a two-on-one is not. A two-on-one means the units are not connected to one another.

There are those that think going in that having some extra income each month is a good thing. Rent from one of the units can be used to offset or otherwise cover in full the mortgage on the property. But speaking of mortgage, here are a couple of things you need to know.

The first is whether or not the property is unique to the area. Or, there are other such properties throughout the neighborhood. And this matters. When mortgage companies first begin to evaluate a loan application for a two-on-one, one of the considerations is completely separate from the borrower’s credit and income. Yes, that’s obviously important. Lenders want to see that you’ve responsibly handled credit currently and in the past. As well, is there enough income to cover the new mortgage along with set asides for taxes and insurance? Both credit and income carry  significant weight in the evaluation of a home loan application. The other evaluation relates to the property itself.

First, is the property in good, livable condition? Sellers know that’s important and want to make sure the property itself is ‘move-in ready’ without any need for substantive maintenance or repairs. Second, are there similar properties in the area? In this instance, how many other ‘two on ones’ are there nearby?

This is important to a lender due to the property’s marketability. If there are other such properties in the area that have sold, the marketability question is essentially answered. This is important to a lender because in a worst-case scenario should a foreclosure be necessary, the lender wants to make sure the property can be sold. If so, you can expect to obtain traditional financing.

One last note, if there is or soon will be rental income from the other unit, don’t expect to be able to use that income to help qualify for a mortgage. Why is that? First, is the rental income being paid on a timely basis and second, is there a solid history of the unit being rented out? Lenders want to see a track record of rent payments.

However, if you don’t need the rental income to qualify and there are other property types in the area, traditional financing shouldn’t be an issue.