Mixed Use Properties - FHA 203(k) Eligible (up to 4 units above a commercial space)

Mixed Use Properties financed using FHA's 203(k) Loans

What is Mixed Use? Simply put, a mixed use property is any real estate that has a combination of both residential and commercial units.

Many people don’t realize that they can purchase a mixed use property using FHA's 203(k) Rehab Loan. Many buyers think they will need a commercial loan with a large down payment to buy a mixed use property even if the majority of the income produced is from the residential section of the property.

OK.....Here is the MOST exciting Part:

The commercial space is not counted as a unit in determining if the property is to be treated as a single family, duplex, triplex, etc. Therefore, a property with four residential units above a commercial space is considered a four unit and can be financed using FHA's 203(k) rehab loan with only 3.5% down payment.

One thing to remember, the buyer will need to occupy one of the residential units as their primary residence. They may not already have an FHA loan on a property already owned by the buyer.

This is an amazing opportunity for buyers to buy their primary residence while at the same time investing in commercial property using a residential loan.

If you were to compare general commercial loan terms to an FHA 203(k) loan, you'd realize that the FHA 203(k) loan is much for favorable in most cases:

Commercial Mixed Use Loans	FHA 203(k) Rehab Loan Mixed Use
Term - fixed rate: 2, 3, 4, 5, 6, 7 & 8 Yrs	Term- 30 Year Fixed or 5/1 ARM
Adjustable rate available	Adjustable rate available
Amortization: 20, 25, and 30 years	Amoritization: 30 years
Prepayment: Multiple options	No Pre-Payment Penalty
Loan to Value Ratios: 75% for most loans	Loan to Value Ratios: 96.5%

Eligibility Crtiteria:

· Property must be marketed and currently used as residential. (conversion from commercial to mixed use not eligible)

· The floor space used for commercial purposes cannot exceed:

· 25% for a 1-story building

· 49% for a 2-story building

· 33% for a 3-story building

· Zoning must be mixed use as determined by the appraisal

· Commercial space cannot affect the health and safety of residential occupants.

· Rehab funds can only be used for residential functions of the dwelling and areas used to access the residential part of the property.

· Commercial rent may be used as income IF space is currently being used as commercial enterprise and has a valid lease that will continue.

· Appraisal Requirements

· Appraisal must be completed on FHA Appraisal Form 1025

· Like comparable sales in the area must be available and used on the appraisal

· Appraised value assigned must be completed as if the total property is for residential use

Below is a chart for the "High Cost" counties in California which specifies the MAX loan limit depending on the number of "Residential" units for the Mixed Use Property:

FHA LOAN LIMITS BY COUNTY	One-Family	Two-Family	Three-Family	Four-Family
Alameda	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Contra Costa	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Los Angeles	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Marin	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Monterey	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Napa	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Orange	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
San Benito	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
San Francisco	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
San Mateo	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Santa Barbara	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Santa Clara	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00
Santa Cruz	$ 729,750.00	$ 934,200.00	$ 1,129,250.00	$ 1,403,400.00

For additional information about loan limits in other counties please visit: https://entp.hud.gov/idapp/html/hicost1.cfm

Please contact me with questions.... I love to discuss different sceanrios and see how I may make them work for you. I am 203(k) certified.... My motto: you won't know unless you ask.