It is important to look at a definition of the 203k loan program provided by the FHA before pursuing one. First of all, this is a government back loan that loans the borrower money before the final closing date for rehabilitation work. The program is used to immediately upgrade the home and help rebuild a struggling neighborhood. The Federal Housing Administration is a government backed program that offers the 203k program to low-income borrowers or people who need immediate repairs to their residence.
Eligible Properties for the 203k Program
When dealing with new construction properties, there are certain guidelines that must be met. For example, additional units on new construction homes (less than a year old), must be attached to the main property in order to qualify for the 203k program. If the residence is more than a year old, the additional units are not required to be attached the main structure. Also, any home that has been demolished but a solid foundation remains; they qualify for the loan program.
Single-Family Homes and Condos
Traditional single-family homes and condos are eligible for the 203k program if they are older than a year. Also, if the resident is looking to expand the amount of units in the home, they can convert a single-family home into a one to-four-unit property by using the 203k program. You can also downgrade a four-family home into a one-family home through the program.
Mixed Use Properties
Mixed use properties are used for buildings that are used as a primary residence along with commercial use. Certain guidelines must be met before the FHA backed lender approves the loan. Some of the guidelines include the commercial use of the building does not affect the health and safety of the dwellers and the funds can only be used on the residential portion of the property. There are certain percentages, such as 25 percent or less of the property is used for commercial purposes for a one story building. Take a look at some more extensive guidelines for mixed use properties on the FHA website.