- Contractors have to go through a decent amount of paperwork in order to get set up to do 203(k) loans.
- For each job they do there is a high burden of paperwork compared to the jobs they're used to. Fully itemized proposals, frequent revisions including for typographical issues, and compliance with all of FHA's policies pertaining to not just the paperwork but the work to be completed... and so on.
- They need the wherewithal, patience, and trust to float materials and labor costs until the job is 100% done and the escrow released. From the initial contact until pay day, you're looking at a bare minimum of four months and frequently longer.
It is crucial that contractors partner up with an experienced 203(k) loan originator who can prepare their expectations and guide them through the red tape, without the buyer's experience suffering as a result. With 203(k) rehabs, the paychecks are big and the money is guaranteed (once the closing occurs), so there is an upside. But getting set up and learning the process takes enough time and effort that it is not worth it for one or two deals - 203(k) rehabs would have to become a sizable part of that contractor's business to make it worth the extra effort.... more