Are there contractor requirements for a 203k Loan?

Truly the only requirement is that your contractor must be licensed and cannot be you. You see, the 203k does not allow for “do it yourself” style work. But don’t worry this is good news! By not allowing for DIY improvements, the projects are more likely to be completed within definite period by a professional remodeler. This offers protection for the mortgage lender and for you. At the end of the day, the you are wanting to make improvements to increase your home’s value and enjoy it more fully. If the improvement projects aren’t completed or don’t meet industry standards, it will likely lead to more headache and could even lower your home’s value.

Some people have expressed concern that they must use an FHA approved contractor with the 203k Loan. However, FHA approved contractors or 203k Contractors are not a real thing. The FHA does not have a list of contractors you must use or a list of those who you can’t. While you may come across contractors that advertise their experience with 203k, that does not make them a preferred or approved FHA contractor. That being said, hiring a contractor who has gone through the process of a 203k is a good idea because he or she is familiar and can help talk through things but the FHA is not going to turn down your loan due to your choice of contractor.

Ultimately, it is your responsibility to find your contractor(s), after all you will be the one working with him, her or even them! The contractor will need to be able to create an accurate work write-up and contract that outlines the repairs/improvements along with the costs, including labor. This information allows your mortgage lender to accurately price the loan. At the start of the process, your contractor will be asked to provide the following documentation:

  • Appropriate licensing and qualifications in their fields. This also applies to any subcontractors they will be using.
  • Proof of insurance
  • A completed profile, including vendor and client referrals
  • A W-9

Once the documentation has been submitted, an agreement spelling out the renovation costs and process is created and signed by both you and the contractor.

For more information on requirements of the 203k Loan, click here!