Shared Lots with Undivided Interests - Properties, including condominiums, with legal descriptions that read “An undivided ½ (or 1/3,) interest in and to Lot. . . . .” are NOT eligible for mortgage insurance. If requested to do an appraisal on a property with this kind of legal description, the appraiser should REJECT the property as the lot is not considered a Fee Simple entity. The lender should be notified of the Reject as soon as it is determined.
Excess Land - Excess land is defined as that which is larger than what is typical in the neighborhood AND capable of a separate use. Generally, the excess portion can be subdivided and marketed as an individual parcel. However, in small communities and outlying areas, appraisers must use different criteria because the market may accept a wide variance in lot sizes. If the plot contains excess land, the appraiser should describe it but not value it. In this instance, the appraisal is based upon a hypothetical condition. A legal description of the portion being appraised is required. The lender will require that the excess land be excluded from the mortgage security.
Nonresidential Use - Any nonresidential use of the property shall be subordinate to its residential use and character. A property, any portion of which is designed or used for nonresidential purposes, is eligible only if the type and extent of the nonresidential use does not impair the residential character of the property.
Areas designed or used for nonresidential purposes shall not exceed 25 percent of the total floor area. Storage areas or similar spaces which are integral parts of the nonresidential portion shall be included in the total nonresidential area.
On 203(k) mortgages, the percentage floor area used for commercial purposes follows these standards:
One story building - 25 percent
Two story building - 49 percent
Three story building - 33 percent
Move-Ons - SeeHUD , Section 12-6 for instructions.
This procedure applies only to stick built homes. Manufactured homes (mobile homes) are not eligible for FHA Insurance if they have moved. The only movement acceptable for manufactured homes is from the factory to the dealer and then to the site. Once there it must remain. It may be jacked up to have a permanent foundation installed. See the section on Manufactured Housing.)
Homes moved without prior approval.
A house which has been moved to a new foundation without prior HUD approval is to be treated in the same manner as proposed construction. That is, if it has been on the new foundation for less than one year, it would be eligible for only a low ratio loan; if it has been on the new foundation for more than a year, it should be treated as any other existing construction over a year old and be eligible for a high ratio loan.
If a house, covered by HUD insurance, is moved without prior approval, whether emergency or non-emergency, the move is made at the risk of the mortgagee. Any damage which may occur to the house during the move will be the responsibility of the mortgagee.
The 203(k) program is available to assist an applicant to move a house.
Copy Printed: REVISION I
02/16/0216 Revision Effective: 05-30-00