March 17, 2019

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FHA 203(k) Rehab Mortgages: Who Does The Rehab Work?

FHA 203(k) rehab loans: who does the work?

When it comes to FHA 203(k) rehab loans, many borrowers want to know who does the work? Can the borrower hire a contractor, is the borrower required to do the work themselves? What are the rules?

The guidelines for the FHA 203(k) rehab loan program are found in HUD 4000.1, which states that certain standards are in place when trying to select the contractors to do the labor.

For starters, this type of loan requires that the borrower use the services of a 203(k) loan consultant.

“The Mortgagee must select an FHA-approved 203(k) Consultant from the FHA 203(k) Consultant Roster in FHAC. The Mortgagee must not use the services of a Consultant who has demonstrated previous poor performance based on reviews performed by the Mortgagee. The Consultant must inspect the Property and prepare the Work Write-Up and Cost Estimate.”

The FHA also provides definitions for key aspects of the above. For example, “work write-up” refers to “the report prepared by a 203(k) Consultant that identifies each Work Item to be performed and the specifications for completion of the repair”.

The term “cost estimate” is defined as, “a breakdown of the cost for each proposed Work Item, prepared by a 203(k) Consultant”.

Borrowers are permitted to contract out the labor or perform it themselves according to page 368 of HUD 4000.1. However, when borrowers do their own labor, HUD 4000.1 instructs the lender as follows:

“For Borrowers performing their own work under a Rehabilitation Self-Help Agreement, the Consultant must identify on the Work Write-Up each Work Item to be performed by the Borrower. The Borrower must not be reimbursed for labor costs.”

HUD 4000.1 has some things to say about the quality of the labor to be used on the 203(k) rehab loan project, too:

“Prior to closing, the Mortgagee must ensure that a qualified general or specialized contractor has been hired and, by contract, has agreed to complete the work described in the Work Write-Up for the amount of the Cost Estimate and within the allotted time frame.”

How does the lender determine whether or not the contractor is qualified? She is required to “review the contractor’s credentials, work experience and client references, and ensure that the contractor meets all jurisdictional licensing and bonding requirements”.

Joe Wallace - Staff Writer

By Joe Wallace

February 16, 2018

Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for for (8) years and is currently the Associate Editor for

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