Question on 203K Loan

[Janille Jackson]

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?

[Paul Welden]

@Janille Jackson

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. 

Hope this helps!