VA/FHA Contractor Requirement

[Jay J.]

Hello All!

I have a quick and hopefully simple question. So, its my understanding that if I use a VA/FHA Rehab loan, the rehab must be completed by a licensed contractor. Is this true??

Assuming it is true, I have a follow up question..

Say I buy a property at $75k, do a $20k/$25k rehab (with contractors) that puts me 'all-in' at about $100k. If I'm paying a contractor $20k/$25k to do the rehab, how am I building 'sweat equity' in the property?

 I mean, wouldn't I be paying that to the contractor?  (One would assume if you pay the contractor $25k, that's not going to raise the value of the house dollar for dollar, ya know..?? )  My assumption is, for example, I pay $3,000 for supplies to fix the bathroom and once done, its adds $7,000 in value.. (numbers are approx, trying to make a point)

Does this make sense?  Am I missing something..??  and who decides who a license contractor is.. Is there some type of approval process for that?