Hello Jrf,

This is a great question, as many contractors are not prepared to work with the program.

Specifically, your contractor needs to understand the draw schedule. Typically, a 203k will be limited to 5 total draws, and your contractor will have to start work without an initial payment. This goes against the grain for most contractors, including my company. However, we are prepared to work with the program because it is Federally backed, and we have the resources to allocate 20% of the contract value to our front end cost. Many contractors, especially smaller firms, are not prepared to allocate $10-25K in up front cost before a draw from a typical 203k. Our average contract requires a 33% deposit on signing the proposal!

Another reason contractors are unwilling to work with the program is the scrutiny their work will receive. Not only the usual village/city inspections, but FHA inspections from the lender. We are not concerned about this increased scrutiny as we do high quality work. Any contractor that is concerned about the added inspections should be avoided!

You can choose any contractor, provided they are willing to work with your lender's and the FHA's guidelines. Make sure before you invest hours of your and the contractor's time, that they understand the 203k guidelines and payment cycle. Your loan officer should be willing to help you explain this to contractors that are unfamiliar that you are considering.

As far as reco's go, you should check with your 203k provider (loan officer) to get reco's from them. They usually have experienced contractors they've worked with before. If not, you should reconsider 203K mortgage providers. I recommend Dario Morales with Legend for 203K's. He has lots of 203k experience, a very good understanding of the process, great reco's for contractors, and will stay with you until the project is complete. As far as contractor reco's, my company would be happy to discuss the project.

Best of Luck!