I am a licensed contractor looking for a 203k loan on a property in Englewood NJ. I have a colleague who is also a licensed contractor willing to do a lot the work. 2 questions
Any suggestion on structuring the deal/contract legally of course to remodel or I can’t be part of any of the renovations?
Anyone have a good contact that is very experienced with 203k rehab loans to get a preapproval and share details and advice on the process?
Any calculators in bigger pockets I can use to estimate after remodel value?
HUD guidelines allow borrowers to do their own work on a 203k (called a self-help arrangement).
But 99.9% of lenders will not allow this because of the liability they would inherit, possible timeline/deadline violations, etc.
Even if self help was approved by the lender, the borrower/contractor will have to include the profit and overhead into the pricing that is added to the loan just in case the borrower/contractor cannot finish the project, there needs to be sufficient funds in the rehab account to pay another contractor to finish it.
So, you won't save $ on the loan amount, or down payment amount, or even your monthly payments by doing a self help.
Any money left over in the rehab account (think sweat equity for a self help 203k), you can do additional work (Standard 203k only) or use it to reduce your loan balance (monthly payments remain the same).
Best to use a Certified 203k Contractor or get accredited yourself, which could be a good selling point to the lender when you ask them to do a self help 203k.
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
3y
Your licensed buddy has to sign that he is doing 100% of everything, he will get a 1099, this is a Federal loan so you don't want to cheat on trying to use your free labor and have him pay you.
203k is a FABULOUS tool. You can rehab but not do certain things like a pool or gazebo. You have to qualify full documentation (IRS returns for 2020 2021 and w-2/1099 for 2022)
Caroline thank you so much for your reply I have do now done more research reading up on the Fannie Homestyle loans as well since we can afford the 5% and there is a do it your self option with some limitations. Thanks again!
HUD guidelines allow borrowers to do their own work on a 203k (called a self-help arrangement).
But 99.9% of lenders will not allow this because of the liability they would inherit, possible timeline/deadline violations, etc.
Even if self help was approved by the lender, the borrower/contractor will have to include the profit and overhead into the pricing that is added to the loan just in case the borrower/contractor cannot finish the project, there needs to be sufficient funds in the rehab account to pay another contractor to finish it.
So, you won't save $ on the loan amount, or down payment amount, or even your monthly payments by doing a self help.
Any money left over in the rehab account (think sweat equity for a self help 203k), you can do additional work (Standard 203k only) or use it to reduce your loan balance (monthly payments remain the same).
Best to use a Certified 203k Contractor or get accredited yourself, which could be a good selling point to the lender when you ask them to do a self help 203k.