Lets get a couple of things out of the way here, what you can and can't do with a 203k and then what a lender will or won't allow you to do...
I'll use the terms "HUD and FHA" interchangeable since most of you reading this will expect to see "FHA" when "HUD" is the body actually setting the guidelines, "FHA" is the type of insurance that covers these loans.
* HUD/FHA WILL allow you to do "Self-Help"
* HUD/FHA does NOT have any requirements on the contractors that do the work (licenses)
* HUD/FHA does NOT have a list of approved contractors
* The law doesn't play any part in the selection of contractors or determination of who can do what, these are investor base guidelines that are determined by the Department of Housing and Urban Development (HUD).
Ok, lets get a bit more granular here.
* A LENDER will ***NOT*** allow you to do "Self-Help" as a rule of thumb - Statistically, foreclosures on rehab loans where the borrower did their own work is SIGNIFICANTLY higher. (It is possible with some lenders to get exceptions to do some minor work but this is the exception, not the rule and usually requires you have the expertise and additional reserves to even get them to consider approving it)
* A LENDER is responsible for "checking out" the contractor. What "checking out" means is subjective, each lender will have a different spin on that. Where I work now, a GC doesn't need to have a license unless one of the jurisdictions the home is in requires he have one but other lenders will require it regardless of what local customs are. Some lenders will do deep background checks on contractors, others will do something more limited.
* Some lenders have a list of approved contractors they'll allow their sales people to provide but everyone keepsa list internally of contractors's they've approved so they don't have to do a full background check everytime a loan with that contractor comes through the door.
There's a lot more I could add but in the interest of time and trying to not put our readers to sleep, I'll leave it here for now.
HUD's primer on a 203(k)
On a 203K loan, you must have licensed, bonded contractors do the work, since the loan approval on a 203K also includes approving the contractors. I hope this helps.
You can ask your lender if the LLC or Company that you own performs the work, if that will be acceptable.
An LLC only costs around 300 to 500 dollars to open and if you need to speak to the CPA that helps me with my companies, just let me know.
Josh Barnett, Realtor
Metro First Realty
Web Reference: http://www.GetSoldOKC.com
Karen Moseley, Realtor
Coldwell Banker Select,
If I can help you find a house to purchase, please contact me at 405-808-7922.
Keller Williams Elite
David Carson, WestStar Pacific Mortgage - 715-3100
Matt Brown, 1st State Bank - 778-6500
Let me know if I can be of any assistance.