On FHA, you can do what's called a "non-occupying co-borrower", meaning the co-borrower is not occupying the property as their primary residence. Therefore, your partner would have to be the main borrower and you would be the non-occupying co-borrower. As long as your partner has good enough credit and documentable income, and assuming that together, you both can qualify for the loan, then it is possible to purchase the house this way and basically house hack. Additionally, if your partner has $0 funds and you have 100% of the funds that would be used to purchase the home, you can use your funds as well and not have to count them as a gift, so long as they are in your account and fully seasoned by the time you buy the property.
As far as the 203k itself goes, they are a great product, however they can be a nightmare if you don't have all your ducks lined up. The most important thing you need to do is call around now and find a general contractor that you like and trust, and more importantly, is willing to work with you on a 203k and is aware if the information that will need to be provided and that will provide that information in a timely manner. The biggest issue I have with 203ks is that no matter how much I stress this, the borrower doesn't take it seriously and when they do find a house and make an offer, they still don't have a GC to work with. So then at the very last minute, they start calling around and find out that a lot of GC's want nothing to do with a 203k, so they end up settling for a third rate GC as they are now under contract and they end up being very difficult to work with because they don't want to provide you the documentation, nor can they prepare the work order the way HUD wants it. So, moral of the story is to start calling around now and find a GC that is willing to work with you on a 203k. If the GC is willing to work with you, but has never done a 203k, this is what you can tell him to expect from the process.
1. There are 5 or 6 forms that you both will need to sign that pertain to fraud, and use of funds and all that.
2. The formal work bid that comes from him will need to show an itemized break down of the total cost of repair between labor and materials. The reason for this is that after closing, the lender will fund the cost of materials first, over a determined number of draws. With each draw, they will send the appraiser out to verify that work is being completed as planned. Once the last screw is turned and the appraiser verifies that everything is complete, the lender will fund the last draw which will usually be the labor portion of the work bid.
3. You will need a copy of their license (if required in your state), as well as a copy their Liability insurance.
The last thing you want to do is get under contract with a bank owned house, then waste two weeks trying to find a contractor and then end up with a bad one that's hard to work with. Having a GC picked out makes this process MUCH smoother because as soon as you are under contract, you can schedule a walk through with your GC and have your formal work bid in hand within a day or two, then your loan officer can prepare your loan app based on the formal work bid and proceed as normal. So within a couple days or so of having your bid accepted, your loan has been submitted to underwriting and there's no screwing around. Hope that helps!
