Home Buying in Logan Square>Question Details

Carl, Other/Just Looking in Chicago, IL

Can 203(k) loans be used to rehab a four flat if the owner occupies one of the units?

Asked by Carl, Chicago, IL Tue Jun 24, 2008

i know that the 203(k) loan can be used by an owner-occupier to make a single family home out of a multi-family unit; but what if the potential owner wants to leave the building multi-family, but then live in one of the units and either sell or rent the others. can the owner still get the benefit of the 203(k) loan, or is the owner then considered an "investor" and not eligible for the 203(k)?

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The borrower can live in one unit but they all must stay under his ownership. You can't do the condo idea under the 203k, Yes, you can purchase multiple units up to 4 under the program but you do have to live in one.
Web Reference: http://www.203konline.com
0 votes Thank Flag Link Wed Apr 15, 2009
"Actually a garage warehouse has been renovated under the 203k program... we did one. What you have to do is 'ask HUD' to waive that rule if you have one that fits the mold otherwise and is located where a home makes more sense than a warehouse due to the properties that have grown up around it. HUD makes the rules and can modify them when it is for the public good. NOT always however. It is a case by case and you need to present the case well."

That's good to know. I should also point out that zoning changes must be made BEFORE the loan can close.

-Inspector Mike Savage
0 votes Thank Flag Link Wed Apr 15, 2009
Yes, to the question about the four flat. No about being considered an investor as long as they borrower lives in one of the units. Find an old 8 unit building and convert it to a four-plex... yes this works too. provided the zoning will allow the change. It is more what it is considered after the rehab is complete than what it is before the rehab begins. If you have any problems with this feel free to contact me and we can discuss your particular situation and offer some guidance.

A question or answer below...
Actually a garage warehouse has been renovated under the 203k program... we did one. What you have to do is 'ask HUD' to waive that rule if you have one that fits the mold otherwise and is located where a home makes more sense than a warehouse due to the properties that have grown up around it. HUD makes the rules and can modify them when it is for the public good. NOT always however. It is a case by case and you need to present the case well.
Web Reference: http://www.203konline.com
0 votes Thank Flag Link Tue Apr 14, 2009
A garage warehouse cannot be converted into residential under the 203(k) because the property must have been occupied as residential. Also, any zoning changes must be completed before the underwriter can issue loan approval for closing. -Inspector Mike Savage
0 votes Thank Flag Link Mon Aug 11, 2008
Yes, and there is much more. Find a 6 or 8 unit building and turn it into a 4-plex under the 203k loan program. Find a garage/warehouse in a residential area and turn it into a 1-4 unit residential property provided the zoning allows this of course. Find a 'mixed use' property and improve the 1-4 units above the store under the 203k loan program. While you can't use the rehab money on the commercial you can rehab up to four residential units and ignor the commercial if it fits the guideline.
Web Reference: http://www.203kOnLine.com
0 votes Thank Flag Link Mon Aug 11, 2008
YES, YES, YES, Owner occupied 203K loan are available.

I have been in the mortgage lending business for 21 years and I do 203k loans.

for more details on the guidelines call me at 630-835-9044

Tino Martinez
First Capital Mortgage
0 votes Thank Flag Link Mon Aug 4, 2008
As Greg stated, the 203k can be used on 1-4 unit buildings and the property has to be owner-occupied, so you'd have to live in one of the units. There are other rehab loans (HomeStyle, etc.) for non-owner occupied, but I believe they require 30% down. -Inspector Mike Savage
0 votes Thank Flag Link Thu Jun 26, 2008
Most likely Yes..

To be eligible, the property must be a one- to four-family dwelling that has been completed for at least one year. The number of units on the site must be acceptable according to the provisions of local zoning requirements. All newly constructed units must be attached to the existing dwelling.

For more information click here..
http://portal.hud.gov/portal/page?_pageid=33,717160&_dad…
0 votes Thank Flag Link Wed Jun 25, 2008
I would refer you to the qualified loan specialists at Lifetime Financial Partners to answer your question. They are a broker/banker and could give you all the information you need! Call them at (630) 622-8607!
0 votes Thank Flag Link Wed Jun 25, 2008
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