We hear a lot of questions lately on do-it-yourself (DIY) projects and FHA 203k financing. People want to save money and do some of the work themselves in a home improvement project. Or maybe they're handy with a hammer and want to work on their own home. Either way, it's time to look at what work, if any, is eligible under the FHA 203k.
First, let's be clear: AmeriFirst Home Mortgage does not advocate self help and HUD highly discourages self help on 203k loans. However, DIY work is allowed in some case with certain restrictions met. Here's a look at 5 procedures in place to make sure the DIY process during an FHA 203k project goes smoothly.
  1. The borrower must be able to provide a time, talent and asset letter. The reason for the asset letter is that we need to know that the borrower has the additional 50% to get the materials and finish the project.
  2. We will need a bid from an uninterested contractor for each self help project –We will use the total bid amount from the uninterested contractor in the rehab escrow and any remaining monies will go to pay down the principal balance on the loan.
  3. The uninterested contractor must break down the bid to separate out the individual costs of materials and labor.
  4. Borrower must provide receipts to show cost of materials.
  5. Due to the risk on DIY loans we will require a 20% contingency reserve.
AmeriFirst Home Mortgage will pay 50 percent of the borrower’s materials at time of first draw and the remainder at the end. No monies are disbursed for labor.
So that's the DIY world in a nutshell when it comes to the FHA 203k with AmeriFirst Home Mortgage. Want to learn more about this option for home improvement loans? Download "The FHA 203k Survival Guide" at the button below. You can also watch our 2-minute video breaking down the FHA 203k with national renovation lending expert Joe Daly: What is the FHA 203k?

(ladder photo: Flickr user TJ Owens)


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