Darn Commercial ZONED! I hoped FHA 203K...

6 Replies

Hello BP!

I have to express my frustrations (and ignorance) in this post. I thought I had a deal when I didn't. Maybe I do! I need your help please.

I found a duplex that needs a little bit of work, I'd say $15,000, in Mesa Arizona. The seller is a realtor, but also an investor with Home Vestors... He's an older gentleman, and we really hit it off! I have mad rapport with this guy!

My wife and I are super excited about this property, only because we want to get it and rent out the other unit. This would be owner occupied.

I call my lender and he approve me for an FHA 203K.

It needs about $15,000 rehab, and my lender said I'm good to go. Seller stated firmly that he must net $90,000. After looking at the property again only this time walking through it with a realtor who is the seller, he explains that it is commercial zone, and that I would never be able to finance the property under an FHA 203K.

I was hoping to avoid using private money, but I can if I have to.

Does anybody have any thoughts of what I could potentially do with this property as it would be owner occupied and also need rehab?

Bottom line, it was recently vacated a week and a half ago and both units were renting higher than $750 a month.

I am not in a position to place a 15% or 20% down payment under a conventional loan, although, I do know some PM people, but I want to keep them out of this one.

What would you do?

A quick google search turned up this:

According to the FHA,

Having a "commercial-with non conforming residential" use property myself, and hitting a snag during the refinance I can tell you with confidence you're fine. When I did my refi the issue was with the property NOT being OO, if it had Fannie/Freddie guidelines allow for financing. She told asked me specifically about the OO because it would mitigate the zoning issue. Even still the underwriter got it done, whether they kept the loan in house or not I'm not sure but they still honored their loan commitment and closed.

Thanks guys,

I called a loan originator later today and he said that he would pass a commercial zoned property for an FHA 203K loan upon acquiring a "Rebuild Letter" from the county. I guess the letter constitutes the ability to construct, thus the FHA 203K is passable?

I'm going to call the county tomorrow and see what they mean by that...this is quite the adventure.

Hi Andrew,

Came across this post and wondered how it all went?

You can put families in commercial properties.  Maybe not everywhere, but as long as you got a kitchen and bathroom and separate parking for the family, you're probably good.  Worst case, rezone.

Hey @Andrew LeBaron , I'm also wondering what came of this! I bought a residential triplex last year zoned commercial with straight FHA (no 203k) and had zero issues. I want to try a 203k in the future and would love to know if this worked out for you. Hope so!

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