FHA 203k Certificate of Occupancy Questions

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I received an email from a customer who found me from one of my many posts on FHA 203k rehabilitation loans in NJ and I thought this was important to explain to all who might be interested in this product.  There are a ton of half finished properties out there that builders started and didn’t finish for one reason or another- borrower backed out, builder ran out of money, etc, etc….The question I had received was about whether or not we could do a FHA 203k rehab loan on a house that was half finished and did not currently have a CO (Certificate of Occupancy) from the township.  This property is located in NJ and CO’s may go by another name in other states but for the purposes of explaining this situation we are going to assume we are talking about a CO.

Framed out house

So what is the ruling you ask?  A property must have had a CO at one point in time or another for at least a year in order to qualify for a FHA 203k rehab mortgage.  That is not an investor guideline either- that comes directly from HUD.  There is no way around this.   FHA 203k mortgages are not meant to be used for new construction however there are instances when you can basically do a tear down and rebuild essentially a new construction loan but again there must have been a CO in place at one time for at least a year in order to qualify.  In this type of situation at least 25% of the original structure must remain- let’s say one wall of a foundation in order to qualify for a FHA 203k rehab mortgage.

As always please do not hesitate to call or email me with any questions regarding FHA 203k loans– there is a lot of misinformation out there.  The customer I was working with on this was told by a certain bank (Bank of ????) that this property did qualify.  Not all loan officers and supposed experts really are what they say they are.  Be careful as the idea is to not hurt you as A customer it is to help you!

Have a great week and bring on the spring time!

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2 Responses to “FHA 203k Certificate of Occupancy Questions”

  1. Dennis Shade on June 8th, 2011 9:28 am

    I’m getting feedback from several lenders that they will allow a 203k streamline immediately after the C of O is issued. Do your comments above pertain to the 203k streamline product as well?


  2. Jeff Onofrio on July 10th, 2011 10:38 pm

    Yes- if the property never had a CO then the property is ineligible for FHA 203k financing. If at sometime it had one then either type of FHA 203k mortgage would work just fine. Thanks for commenting and please keep checking back!

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