When using the Arizona FHA 203k streamline to finance your home, you will usually need to get a contractor to perform the work. The general process of finding a contractor and working with the lender and contractor looks like this:
- Lender reviews the contractors license, bonding, insurance and credentials
- Contractor estimates and provides the lender estimates that clearly state the nature and type of repair cost for labor and completion of the work.
- Lender reviews the estimates. The lender may call the borrower, loan officer and/or contractor to discuss the estimate and ask any additional questions they may have.
- Lender then can accept the estimate or ask for more estimates.
While it may seem like a long process – it really isn’t all that bad. Most lenders require that you use contractors to complete the rehab work unless the borrower can provide proof that they can perform the work (for example, if they are a general contractor, that is always a good sign they are capable…) but when the borrower is the one who completes the work the following apply:
- Borrower must provide documented proof of expertise required to complete the work
- Borrower ensures that the work will be completed within a “timely manner” (generally no longer than 3 months)
- Borrower must execute a “self help” agreement
- Borrower provides written estimates of supplies required to complete the work and must include labor in cost estimate in case a contractor is hired to complete the work.
- Borrower may not be compensated for his/her labor. No “sweat equity” is allowed.
Is it possible for a borrower who is capable of doing the work be allowed to do the work?
And now you know the rules of what will be required by the lender!