Can the home buyer or the homeowner do the FHA 203k renovation work by themselves without a contractor?

It depends upon your qualifications, the nature of the work, and each lender’s guidelines.

First let’s focus on what HUD says you must have to qualify:

• You must have the qualifications to do the work. You’ll have to write a letter explaining how you’re qualified that’s acceptable to the lender.
• You must have the time to do the work. If you’re working 2 jobs, as an example, it will likely be determined you don’t have the time.
• You must have your own tools. The tools cannot be financed into the loan.
• If the work requires you to have a license (electrical, plumbing, heating and air conditioning) or the zoning jurisdiction has requirements, you’ll have to comply.
• No labor is financed for “self help”. As a result, you’re going to have to have some money to buy at least part of the materials, install them, and then get your money back.

Other requirements lenders may place on this situation:

• Some lenders simply won’t allow “self help”
• Some lenders will require the borrower have an extra “cushion” of money left in their bank account in case they run into an unforeseen problem
• Some lenders will require a bid for the work, and require the borrower to borrow the extra money in case they can’t complete the work

Many FHA 203k lenders will just cringe at the thought of letting you fix up that “dream home” yourself.

Does that make it impossible for you to do it “your way”? Does that make it impossible for you to save a few (maybe more than just a few) bucks and maybe even do better work than that contractor would have for double or triple the price?

The real answer is: It depends!

Under the FHA 203k guidelines, there is a provision to allow borrowers to do some of the work themselves provided they are truly capable. So, FHA says in order to do the work yourself you’ll have to meet some conditions:

You must have reasonable time to do the work.
Lenders expect the work to begin within 30 days (FHA requirement) and not stop for more than 30 days once it starts. It is expected the project will be completed promptly. So, if you work a typical 40 hour job with no overtime you may qualify on this front. But what about if you have been working two 40 hour jobs? Would you have the time? Probably not, according to most FHA underwriters.

You must be qualified to do the work.
If you want to do electrical work that requires a license and you don’t possess the license, this won’t get approved. Now let’s say you want to repair a ceiling that has a hole in it from a prior water leak that’s now been fixed. You have your own tools because you used to do drywall work in the summertime working for a contractor when you were in high school. So you have the “time, talent, and assets (tools) to do the work. You’ll be required to “apply” to do the work yourself (there are forms) and write a letter explaining why you’re qualified and have the time and tools to do the work. Under a circumstance like this, you may be approved (depending upon the lender – not all allow any self help).

Keep in mind that in addition to the “pure” FHA guidelines that all lenders participating in the 203k program must follow, each lender may add their own guidelines. In many cases, there may be additional financial qualifications that go beyond what a person would need to qualify for a loan using a contractor.

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