Why is the sq footage not being counted?

That room may not be permitted and might have to be torn down or brought into compliance with the building code.  Check with your county tax assessor for the building record of the property to see if it was permitted.

This isn't a legal question. I suggest asking your loan broker. As a non-legal answer, why not put some furniture in there and send the lender some photos? Maybe make it look like a home office, with a couple of chairs a table or desk with a laptop and a bunch of papers and books. Maybe a small bookshelf with some books and souvenirs or other knickknacks. 1-2 lamps for light. If you don't have some extra furniture do outfit the "home office," hit some yard sales this weekend or go to Goodwill or Salvation Army. These aren't intended to be permanent possessions and furniture for your use. These are props. If you appreciate this free advice, please remember to refer me to any friends or acquaintances who need a lawyer. Referrals are still our best source of new business. Do you have a revocable living trust to protect your heirs against probate? Probate takes forever, is expensive, and is annoying. Do your family a favor. Set up a trust, and put all your property, especially any real property, into the trust. Since it is revocable, you can change it, add to it, take property out of it, or even cancel it completely, at any time. We set up such trusts, provide a pour-over will as a back-up for any property that does not make it into the trust, provide you with blank durable powers of attorney for health care and financial decisions, in case you become incapable of making such decisions while still alive, and convey one piece of real property to the trust, usually the family home, for $1500.00. If you would like to hire me to do this, let me know, and I'll send you a list of the information I need. Dana Sack