The FHA 203K loan enables you to make necessary and desired repairs on almost any part of your home. You can take advantage of the streamlined program, which is a quicker process, but only allows up to $35,000 in repairs to be done or the standard program which has no dollar amount limit for your loan amount; it strictly depends on the predicted value of the home after the repairs and your own qualifying credentials. In either case, you generally need a licensed contractor to do the work for you. But, if you want to save some money and have the know-how, there are a few ways you can do the work yourself, but you have to be ready to prove yourself in order for the lender to approve this method.
Proof you have the Time to do the Repairs
The first concern most lenders have is the amount of time you have to dedicate to the project. Depending on the complexity of the repairs, you may need to invest quite a few hours on the project. If you work full-time, that does not leave a lot of time to work on the home during daylight hours. Even if you were able to work on the repairs at night after work, you might not get everything accomplished that is necessary to get the job done on time. In order for the lender to consider approving you to do the work, you have to be very detailed in how you will fit the work in with your regular job and the timeframe you expect to complete the job in. Generally, all work must begin within 30 days of the closing of the loan and be completed within 6 months of starting the work. If this does not seem realistic to you, hiring a contractor might be the better choice.
Proof you have the Skills
Aside from time, the lender will be concerned about your knowledge to complete the job at hand. If it is a complex job, such as an addition or completely tearing a room apart and starting over, you have to have a lot of knowledge to complete the job. In order to get approved for the job, you will have to prove that you have the knowledge and experience necessary to complete the job. When you wish to do the work yourself, you have to provide everything a licensed contractor would – so you will have to basically apply for the position, showing why you would be a good fit for the job. If you do not have the required experience, you should not consider doing the work yourself as the lender will be very unlikely to approve it.
Most lenders require you to have extra reserves on hand when you complete the FHA 203K loan work yourself. This is for several reasons:
- To ensure that you have enough money if anything were to go wrong and more work need to be done by you or a contractor
- To have enough money to pay a contractor should you run short on time or figure out that you are not equipped to get the job done in time
In addition to the money you will need to have on hand or have room in the loan as your “cushion” you will need to have a contractor’s bid on hand, just in case. This way the lender can ensure that if you do have to bail out on the work suddenly that you already have a contractor on hand and available should you need him to take over.
It is somewhat rare for lenders to approve self-work on a 203K loan, but it is not impossible to get done. Just like with any other odd circumstances that occur with various loans, you need to shop around with various lenders. What one lender says “no” to, another might be willing to take the risk and give you the loan.