I'm a GC. Can I rehab my own 203k property?

[Alice Jackson]

My husband and I had an offer accepted on a property. We are approved for a 203k loan. My husband is a licensed General Contractor (in Maryland) who has rehabbed houses for others (even 203k houses). I'm wondering if he can do the work on our 203k property. It is a streamlined 203k loan. I've heard that he could do the renovation but could only be reimbursed for material (not labor) costs. I haven't been able to find this documented anywhere. Can someone who is knowledgeable please provide some insight or possibly a reference? Also, the house is in another state (NC). Not sure if that makes a difference. Thanks in advance for any input.

[Perry Farella]

The short answer is some lenders will allow it and some will not. Technically FHA will allow it provided there is no payment out of the loan for Labor to the Borrower/GC. Usually to protect the lender there may be imposed a requirement of a larger 20% Contingency Reserve off the base budget. Or perhaps require a "back up" contractor submitting a proposal for same budget who can step in should the Borrower/GC have too much work doing his regular job earning money to pay the mortgage to also do his own 203k work. Its all about being sure the house can get completed, on budget with funds in the 203k so that a Borrower and Lender never end up with a unfinished house because the Borrower/GC had too much work in his regular job or got sick etc. I have helped clients do this so happy to answer questions.

More specifically to you though since house is located in NC and husband seems to be licensed as a GC in just Maryland the lender would require whatever local GC license is need in NC to truly as  a GC. Failing that most lenders will allow up to 3 sub-contractors on a 203K without a GC at all. Meaning Borrower acts as a GC. But on a larger project with the need for multiple subs beyond 3 then it becomes an Exception the lender has to make on a case by case basis. If there are strong reserves, a 20% contingency reserve it should be ok. Happy to help if I can.