203K Consultant (PA): What's an Eligible Property?

Reblogger Dan Edward Phillips
Real Estate Agent with Dan Edward Phillips

This provides answers to many common questions on 203 K loans.  Thank you to David Artigliere, Home Inspector, in Collegeville, PA for providing the post.  Please leave comments on David's original post.

Original content by David Artigliere


 203K Consultant (PA): What's an Eligible Property?


As a 203K consultant in PA, I sometimes get questions from clients wondering if their current home or a property they are purchasing would qualify as an eligible property under the FHA 203K loan program in PA.   


Here are some questions I have been asked regarding what's an eligible property:


Are only single family homes eligible for 203K loans?duplex

Single family dwellings are eligible properties under the FHA 203K program, but so are 2-4 unit dwellings as long as they are owner-occupied.  Real estate investors do not qualify under the FHA 203K Program, unless that investor is truly planning to owner-occupy the property AND has no more than 7 units belonging to the borrower in a 2 block radius of the property in question.


Does the rehab work on the property have to comply with any standards?

Yes, the improvements must comply with HUD's Minimum Property Standards and all local codes and ordinances. Your 203K consultant can help you with understanding these standards.


Can I get a 203K loan for a condominium?

Yes, you can!  However, you need the following conditions:

condoA. You must be an owner/occupant;

B. Rehab work is limited to the interior of the unit unless you are installing firewalls in the attic for the unit;

C. Only the lesser of five units per condominium association, or 25 percent of the total number of units, can be undergoing rehab work at any one time;

D. The maximum mortgage amount cannot exceed 100% of the after-improved value;

E. The individual buildings within the condominium must not contain more than four units. By law, Section 203(k) can only be used to rehabilitate units in one-to-four unit structures. This doesn't mean that the condominium project, as a whole, can only have four units or that all individual structures must be detached.  Ask your 203K consultant to explain this further if you aren't sure your unit qualifies.

Can a 6+ unit building be done using the 203(k) program?

No, unless you plan to renovate the building and reduce it to a four unit building.


Can a nonresidential property (storefront) be eligible for a 203(k) loan?

Yes.  A mixed-use residential property is acceptable as long as the rehab funds are for the residential portion of the dwelling.  Also, the percentage of commercial use needs to be below certain guidelines.  For example, with a one story building, the commercial use (storefront) must be 25% of interior floor space or less.


Can HUD-owned properties be purchased using the 203(k) loan?

Yes, but the property must be advertised that it is eligible for financing with a 203(k) loan.  Otherwise, you can purchase the HUD-owned property with other funds and obtain a 203(k) loan as long as you obtain the loan within six months of purchasing the HUD-owned property.

Hopefully, this gives you a better understanding of What's an Eligible Property under the FHA 203K program.  Just make sure you have a good PA 203K Consultant!


david the home inspectorDavid Artigliere with ARTI Home Inspections is a 203K Consultant and Home Inspector in PA

Visit www.203kpa.com or call (610) 220-1907 for more information.

You can also visit HUD's website for more information on FHA 203(K) loans.


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Dan Edward Phillips

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