203k Contractor

5 Replies

Question for those that have dealt with the 203k loan. I currently own and operate a remodeling and home renovation company. Has anyone used a 203k loan and done any or all the repairs to the property as contractor+ homeowner using the funds from the loan?


I have not personally done a 203K loan but i have done plenty of research as this seems like the avenue that i want to go down. You plan on occupying the property right? 

From my research, lenders strictly prohibit the buyer to do any of the work themselves...this is to reduce the lenders risk. BUT, depending on the lender, they will allow the buyer to conduct renovations if they are licensed to do the work. I am sure they would like to see past work, references, etc to prove you are capable. 

So to answer my own question.

After lots of phone calls, I found that Wells Fargo offers 203k with a very competent agent out of Atlanta. Jeremy Walton 404--435-8666

They allow for what is called a "self help" section. You will still need a contractor if you are not a home builder or hold the correct license in your state. However, no sweat equity you have to pay yourself to do the work. Which if REI is your long term goal, you get paid 2times, to do the work and equity in the house. Win-Win is my thought.

There is a FHA and a conventional which the interest is about the same but the down payment is high for the conventional however it is more open to self help.

FHA: 3.75%

Conv: 5%

Credit score

FHA: 600

Conv: 640

Lots of paperwork, but worth it. If it was easy everyone would be doing it. 

@Josh Anderson  good information. ill have to reach out to my local well fargo and see what their policies are. 

I've done something very similar to a 203K loan. It was a small, local credit union that financed our purchase and rehab costs... all rolled into one loan/mortgage. I was the homeowner and my partner in our LLC was the contractor. Works very much like a construction loan.

Self help is frowned upon by most lenders but they all will do them if you are a state licensed contractor in the state where the property exists. Most contractors know another contractor and we have seen the friendly contractor become the contractor of record and then sub out the entire job to the borrower contractor. 

The consultant still has to bid the job in case the job doesn't get finished he or she will have enough money to complete the job with another contractor should the need arise. This is exactly why we don't like the Self help program as the owner builder will always under bid the job to keep the loan amount lower. 

We suggest you do what you do best, let another contractor build your home so you can have someone else to blame when the work takes longer than anticipated. Be sure you have plenty of money to get the job done, bid it like you bid for another. When it is all completed you will want to refinance out of it anyway so you can get rid of the PMI, private mortgage insurance that haunts every 203k buyer.

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