You found a home that you want to rehab and are excited to start the FHA 203K financing, but first you must find a contractor! This step might be the hardest step of all in the loan process. Unfortunately, there is not a list of contractors that are approved or suggested by HUD. There is no such thing as certification and there is no perfect way to tell which contractor is right for you. It takes some research on your end to find the one that will do the job that you need. These steps should help you get started.
- Figure out what work you need done. This needs to be done before you look for a contractor because you need a professional that can handle the scope of work that you need completed. Ask around for referrals if you know others that have had rehab work done to their home. You can even ask your lender for referrals, but remember, these contractors are not tied to the loan or the lender at all, so you are not obligated to use them.
- Read reviews online. You cannot believe everything you read, especially if the reviews are directly on the contractor’s website, but it should be easy enough to tell what is real and what is fake. Consult with third party websites and see what others have to say. If you find good reviews, ask the contractor for some personal referrals in the area, possibly referrals where you could go and see the work that was completed.
- Ask about insurance and licenses. You do not want to work with contractors that are not licensed and insured. You can find most of this information online, depending on the state you live in or you could ask the contractor directly. You want to make sure they are fully covered in the event that something were to go wrong on the job and something or someone were to get hurt. If damages occurred and insurance was not obtained, you could be liable for the damages.
- Get several bids. The bid process is time consuming, but it is worth it in the end. Once you have a contractor that provides, not just the lowest bid, but a quality bid, then you can pass him along to your lender. Don’t fall for the lowest bidder though as they do not always provide quality work – they have to make up for the low prices they are quoting you somewhere. That somewhere is typically in the quality of their work or the materials they use.
- Determine your budget. Be up front with contractors about your budget. They will let you know if they can work with you or not. This will help you to avoid wasting time on contractors that you could never afford or those that are just not reasonable with their estimates.
Finding the contractor for your 203K loan takes a lot of legwork. Oftentimes, the loan consultant can help you with this process. This can be especially beneficial because you are able to use his expertise in the area to find the contractor that will do the job right. If you have never rehabbed a home before, this step could be very overwhelming. Let your lender and loan consultant guide you along the way while you put in your input when it is necessary. This will help you have the greatest outcome from the process of creating the home of your dreams from a simple, fixer upper that no one else wanted to touch.