Resi/Commercial Mixed Use & 203k Mortgage in CT

[Eric Lindquist]

Hi all,

I'm going to try to keep this fairly straightforward, and can provide details as needed, but I have a tendency to ramble. Please bare with me and I thank anyone who can provide me any insights.

My wife and I are looking to purchase (our first, technically) a small factory building next door to the home we currently rent. It is designated as mixed use resi/commercial property by the town. Currently, it is gutted (no furnace, older plumbing & electric, 6 big empty rooms but structurally quite sound, newer roof, double-paned windows, etc) and so our goal would be to turn the main building into a residential area, and the warehouse into space for my existing businesses. It has never been residential before. Phase 1 environmental testing has been inconclusive, and a grant from the state has been awarded for phase 2 & 3 testing with the balance going to any clean-up. Total assessed value is around 170k. The building has been empty since the 90s, was last used for it's original purpose in the 60s and was an antiques store until it went under. My questions: 

1) From my research, I *think* the conversion of the front building to a residential space qualifies under the 203k guidelines but since not a lot of people do this who are in my situation, I cannot find much information. The costs would likely be more than the streamlined program allows for, so full program it is, I guess. Can anyone clarify? If it's not under the 203k umbrella, what are my options?

2) As a small business owner, I have extensive P&L sheets for every month starting in Dec 2014 when I opened the biz; and started profiting in Jan 2015. I only have one month of losses. Is this a long enough time frame provided I have sufficient income for a loan officer to not just balk and run away? I've heard 1 tax return is OK, 2 is better. Thing is, I've made more Q1 of this year than I did in the entirety of 2015. My wife works part-time and as such, doesn't make much money, and just started her job 1 year ago. My gross income from last year isn't very impressive, and it's the income from the last quarter of 2015 and this year which I'm counting on qualifying with. 

3) Regardless of the answers above, can anyone recommend a good lender in the CT area, preferably one who understands the ins and outs of rehab loans like this, and even perhaps CHFA loans?

4) What should I be doing to make this happen with regard to our finances, our credit (my score is only 640, less than 6k in debt, all medical, all fairly old but still within SOL and the wife's is about the same, little higher score). Debt-to-income ratio is 2%, wife is under 30%. Business has no debts or outstanding invoices. We own our cars outright and have under 1k in credit card debt.

5) Finally, the fellow who owns it is older and has been trying to sell on and off for about 8 years. It's not in a high demand area commercially and hasn't drawn a lot of interest. Would it be worth it to pursue a more creative approach to acquiring the property? I'm not sure how to go about that.

I understand this isn't about investment properties per se, and I appreciate the time anyone takes to answer any of these questions. Hopefully sometime in the near future I can also contribute positively, as our ultimate life plan is to purchase investment property someday when my business can run itself a bit more.