It’s not always easy for borrowers to find a competent FHA 203k contractor to finish the rehab work on their residential property. On a standard 203k loan, the repair work must be completed by a licensed general contractor.
Based on the 203k consultant’s work write-up, a borrower invite bids from contractors. The bid document will provide clear breakdown of all the cost estimates for all the proposed renovation work.
Find a 203k Contractor
Finding the right general contractor is critical for the proper completion of a 203k-funded rehab project. One should talk to trustworthy people that may have worked with contractors in the recent past. Realtors, property investors, architects, builders and agents are a good pool of people to consult when finding the right 203k contractor.
Once a list of prospective contractor candidates are in hand, make sure to verify and cross check their licensing, credentials and experience. All state contractor licensing boards present a web interface to provide easy access to license verification info. A borrower should note that there may be more than one category of licensing with different requirements.
The 203k lender processing the loan application under the FHA rehab program will review the proposed work and cost estimates to ensure that they fall within the specifications. The lender uses the 203k consultant write-up in the home inspection report along with the contractor bids and appraisal report to carefully assess the eligibility of repairs.
After receiving the 203k contractor bids, a consultant will review each of proposed cost in thorough detail. It is the responsibility of the consultant to ensure that the repair costs are acceptable and within reasonable estimates. Anything that is deemed to be excess or unnecessary is resolved on consultation with the borrower, contractor and the lender.
Becoming a 203k Approved Contractor
Most 203k lenders have a standard procedure to assess a contractor’s eligibility. A 203k contractor is required to submit cost estimates along with references, credentials and financial data. The license documentation along with a copy of the commercial liability insurance policy needs to be submitted for approval.
An agreement is reached with the contractor to complete the work at the agreed price within the stipulated timeframe. An IRS w-9 form must also be collected for the 203k contractor and also for any other vendors involved in the completion of the renovation work. This step is necessary prior to release of any fund advance to the contractor for initiation of the repair work.
A FHA 203k contractor is expected to complete the proposed work in accordance with the details outlined in the written estimate, homeowner/contractor agreement and approved change orders. All the repair work and improvements should be completed under the applicable local codes and ordinances. A number of permits which are necessary must be secured prior to beginning any concerned work. All payments required for permits will generally be listed in the 203k contractor’s bid sheet.