Many people who think of using the FHA 203k loan to buy a fixer upper only think of buying a single-family house and fixing it up. But you can also buy a condo and use the FHA 203k loan program to provide the funds to fix up a condo or townhome that you buy. We have a number of detailed articles on the basics of 203k loans, so if you do a search of the site you can read those to learn the basics. But to refresh here are the highlights of the FHA 203k loan:
- The lender will lend you the cost to buy + the cost to fix up, minus your 3.5% down payment
- The down payment can be a gift from a relative
- You start by gettig a detailed estimate from a contractor on the items you would like to fix on a the house you want to make and offer on
- The subject property must be your primary residence
Now let’s specifically talk about using the FHA 203k fixer-upper loan on a condo or townhouse. First off, I also have another article on this site on the pro’s and con’s of condo’s and what to look out for when using an FHA loan to purchase a condo. Do a search to find that and read it.
Condo and townhomes have their postives and negatives. Most people would rather buy a single-family home if they had the choice. But the problem with that is that single-family homes can be out of the price range of many buyers in the better neighborhoods they would prefer to live. If they buy a single-family, it may have to be further away from their work and/or in a less than desirable neighbood or school district in order to find something afforable.
The positive side of condo’s and townhomes is that they can often be found in the really prime, close-in neighborhoods for the same or less price than a single-family out in the boonies. And for some they offer less maintenance than a single-family and the ability to just lock the door and not worry about their place when they leave town.
Now back to using a FHA 203k loan to buy a condo. Many times a buyer can find a drastically reduced price on a condo or townhome because the interior is in bad shape or needs updating. Other buyers shy away from it so the seller can be negotiated with. Using the 203k you can purchase the property and get the funds to completely update the interior of the condo and raise the value significantly. Here are some items you might fix using the FHA 203k:
- Completely update the kitchen with brand new counter tops, cabinents, and appliances
- Re-finish the floors with polished hardwood, new tile or fresh carpeting
- Completly paint the interior with high grade paint
- Totally re-do the bathroom floors, showers, tubs, faucets
- Update the lighting fixtures throughout
- Etc…
Now your get the picture. You can use the FHA 203k loan to get a great price on a condo that needs cosmetic updating, and then you can completely spruce the place up beautifully with funds from the 203k loan. The nice thing about the FHA 203k loan is the fix up funds you used to fix up the condo/townhome are part of your loan balance. So they are fixed at a low 30 year fixed rate and will be tax deductable as long as your own the property.
So as you can see, you can use the FHA 203k loan to find a great deal on a condo/townhome ugly duckling and then immediately turn it into a beautiful swan.
Please call or email with any questions you have about the FHA 203k loan and/or if a condo you are interested is FHA approved or eligible for a FHA spot approval.
Warm Regards,
Rob Chomentowski
Sr. Loan Officer and FHA Loan Specialist
858-922-7899
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