Profile picture for DarrellVan Meter

203k Loan - Relative/Self Work

I am aware that for 203k loans you need a licensed contractor that will act as the general contractor to the work. From what I gather they do not specifically need to do the work them self and can rather dictate the work of sub-contractors as needed.

My father is a self-employed handyman who specializing in painting but also does light remodeling such as flooring, insulation, sheet rocking, etc.

If I was to purchase a new home with a 203k with a licensed general contractor would there be anything wrong with my father sub-contracting for the general contractor? The general contractor would be a family friend and would be open to this type of commitment. The work he would be doing would be identical to the work he has been doing on a daily or weekly basis for the past 10 years and he would be compensated for labor.

I also gather that the homeowner, myself, could perform work on the home as long as it was not part rehab work in the agreement with the lender. For example,  if the agreement didn't involve remodeling the bathroom then could I remodel the bathroom myself?
  • November 19 2013 - US
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Answers (4)

Be careful what lender you go with for your 203k loan.  Some lenders do not allow any self work or involvement in any part of the construction project.  If you are honest and up front with your loan officer and lender they should be able to foresee any issues with the situation that you have described before signing any documents.
  • November 20 2013
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Profile picture for shapiroamg
You can do the work yourself but the work proposed must have estimates from licensed contractors. The appraiser will use the estimates for the loan. The theory is, that if you default and HUD takes over your home, they will have to pay a contractor to finish the work.  Any money saved between the work you do versus the estimate will be applied to principal reduction once completed. No money ever is returned to you.

If going the full 203K loan. As part of the loan process you will hire a 203K Consultant who will review and write up all the work that has to be done. So as your example states in the last paragraph, there will be an assigned dollar amount for the bathroom remodel even though you may GC this yourself.
  • November 20 2013
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I would suggest that you review the 203K documents/affidavits with a lender prior to entering into a contract. Andrew's willy-nilly comment suggests something Wild-West here, and the 203K is far from that. There are plenty of identity-of-interest check points that need to be addressed with this program. You especially need to deal with these since you have already discussed potential issues. Great program, but don't go signing any contracts without understanding the process, your legal responsibilities, and documentation.
  • November 19 2013
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You are correct in the way you are thinking.  That would work as the GC is responsible for the project as a whole. The work you would do yourself would just not be a part of the bid or the "after repairs" appraisal.   Also keep in mind that there are other renovation programs that might be less expensive than the 230K if your credit is above 680 of there is not a lot of work that needs to be done to the property. 

  • November 19 2013
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