Borrowers think they can save money by acting as their own General Contractor when they are using the FHA Renovation Loan Program, but they can not unless they are a general contractor by trade. There are some small items of repair that the Underwriter will allow the borrower to do, one of them is painting the interior and on some occasions the exterior will be allowed.
When a borrower is allowed to act as their own General Contractor and complete the repairs. They must give a copy of their resume' for the underwriter to approve and review.
They must provide verification that they have enough funds in the bank to cover the cost of purchasing the materials. They will not be reimbursed until they can provide receipts for each item purchased. The Borrower must also show enough funds to pay any Sub- contractors, remember Contractors are reimbursed. Some Lenders may not allow the contingency funds that are on the Maximum Mortgage Worksheet to be financed into the loan, therefore the borrower will have to put up those funds in cash.
Some Underwriters may need the borrower to provide a time line to show how they plan to complete the project if they are approved to do the work themselves. Home Owners that want to do the work themselves don't understand that when they finish working their 8 hours on their day job, the last thing they want to do is go to a house that needs to be renovated and work another 4 to 6 hours. Finding help at the end of the day is another problem for home owner turned General Contractor, friends and family have worked the same 8 hours and the last thing they want to do is volunteer to help renovate a house.
Time is of the essence when working on a renovation project. If the work write-up states that the renovation will be completed on a certain date, then the Lender is going to look for that property to be completed on that date. Weather delays are acceptable. If the completion date is not going to be met, then the lender may or may not grant an extension. Delays in completion can cause the loan to go into foreclosure.
It is something to think about if you want to be your own General Contractor.
The most important thing to remember is to get educated if you want to use the FHA Renovation Loan Program. It really is the most exciting Mortgage Loan Program on the market; you can purchase and renovate or refinance and renovate all with one mortgage loan.