I've been doing some research, and landed on a question that I don't know the answer to. It is clear that an FHA 203(k) loan can be used to purchase a mixed use property under the following conditions:
1. No more than 49% of the total floor space is devoted to commercial use 2. There are no more than 4 residential units
Following this logic, a building that had four residential units, and one commercial unit, would be able to be financed under FHA.
Can anyone here confirm or comment on this? Or ever seen it before? I realize it is a rather niche question.
The specific part of HUD 4000.1 that caught my eye was the eligible properties section:
ii. Property Eligibility
The Property must be an existing Property that has been completed for at least one year prior to the case number assignment date. If the Mortgagee is unsure whether the Property has been completed for at least one year, the Mortgagee must request a copy of the Certificate of Occupancy (CO) or equivalent.
A Property that is not eligible for a 203(b) Mortgage due to health and safety or security issues may be eligible under 203(k) if the rehabilitation or repair work performed will correct such issues.
A Property with an existing 203(k) Mortgage is not eligible to be refinanced until all repairs are completed and the case has been electronically closed out.
The following property types may be financed:
a one- to four-unit Single Family Structure;
an individual Condominium Unit, meeting the following requirements:
the unit must be located in an FHA-Approved Condominium Project and must comply with all other requirements for condominiums;
rehabilitation or improvements are limited to the interior of the unit, except for the installation of firewalls in the attic for the unit;
no more than five units per Condominium Association, or 25 percent of the total number of units, whichever is less, can undergo rehabilitation at any time; and
after rehabilitation is complete, the unit is located in a Structure containing no more than four units. For townhouse style condominiums, each townhouse is considered as one Structure, provided each unit is separated by a one and one-half hour firewall from foundation to roof;
a Mixed Use Property with one- to four-residential units, provided:
51 percent of the Gross Building Area (GBA) is for residential use; and
commercial use will not affect the health and safety of the occupants of the residential Property; and
a HUD Real Estate Owned (REO) Property:
the Property is identified as eligible for 203(k) financing as evidenced in the sales contract or addendum. Investor purchases of HUD REO Properties are not eligible for 203(k) financing.