FHA 203K loans are offered by HUD approved lenders. The underwriting and approval procedures are based on FHA 203k guidelines.
A borrower can use the financing offered by a FHA 203k loan to renovate or improve a condominium unit.
The following conditions need to be fulfilled before a condo unit can qualify for a rehabilitation loan.
- A 203K condo loan can be only be made to owner-occupant borrowers and eligible non-profit borrowers. Condos used as rentals, second homes or for investment purposes are not eligible.
- The renovation work to be undertaken should be related to the interior of the condo unit. The 203k loan for a condo rehab must not be used for exteriors or other areas which are the responsibility of the condo association.
- The maximum loan amount that can be approved for a 203k loan on a condo unit cannot exceed the after-improved value of the subject unit.
- FHA 203k condo guidelines stipulate that once the rehab work is finished, the individual buildings in the condominium can’t be more than four units. High-rise condos or other condos with more than four separate units can’t qualify for a 203k renovation mortgage. Example: A condo project can have 20 buildings and each building can contain up to four units. A condo unit in such a project is eligible for lending through a 203k rehab loan.
- These individual buildings need not be detached. For townhouses or row homes, the buildings need to have a 1.5 hour firewall between them.
- The condominium project must be FHA approved for any individual units be eligible for 203k condo loan.