Common Misconceptions of FHA 203k Rehab Mortgages

There’s some really big misconceptions regarding the FHA 203k mortgage, we’re going to talk about a few here.

The first one is that the FHA 203k rehab mortgage is hard.

It’s not! This isn’t rocket science guys, it’s really not that hard. The truth is the program really comes down to the people that are involved and the people that you have working with you on the project. If you have a lender who doesn’t know what they are doing, if you have a consultant who’s only done a few consultant reports in the last 10 years, if you’ve got a contractor who’s never done one and you have a Realtor who’s never done one- guess what, you’re going to have a problem- big surprise! Here’s the deal though, by selecting a lender with experience who actually plays what we call the FHA 203k quarterback, You will see that the program can be done quickly, easily and efficiently.

Basically what this person does, we coordinate the entire transaction:  1- we coordinate the buyer- we make sure that they are pre-approved 2- we coordinate the consultant to make sure that they are ordered up 3- we make sure that the contractor understands the FHA 203k program- they have to understand how they get paid and finally then we have the same conversations with the Realtor. We mentioned that the Realtors understand exactly, as well, because truth be told, when all of the parties don’t understand and the expectations are not set we run into problems. If done correctly, the FHA 203k loan can be done quickly, easily and efficiently.

Next, the FHA 203k rehab mortgage program takes too long to close!

No, it does not! That is not the truth. Here is a prime example. We had a customer who came to us from a referral, a Realtor who had never done a 203k. You can reference her on my YouTube video here. She will tell you about her experience with the FHA 203k program. Truth be told, when she came to us she had no idea, now she loves it! Because, here’s the deal, she came to us, we explained to the customer, we got them pre-approved, hooked them up with a contractor (actually a couple of them), he already had one as well, we explained to them how the program worked, he hooked up with our consultant, we all met out at the property and literally within 30 days we closed the loan. That’s right, guys, 30 days!

Realtors ask us all the time, how long does it take to close one of these loans? It always comes back to the same thing-  it only takes a long as the client takes themselves because, ultimately, it’s an FHA loan.  The only difference is there’s a special escrow that’s set up. So the customer needs to select their contractors in a timely fashion. We do our work the same way we normally do. So if the customer sets up their contractors quickly and decides on somebody, we can close one of these loans in 30 days.  Again, working with experienced 203k lenders, consultants and contractors make all the difference. So when looking at doing this, we always recommend Mike Grace from the 203k Connection as our spot to go for our consultants. We also recommend Paul Weldon at These are two great resources. And, of course, we recommend ourselves as the lender because we know what we are doing!  If it’s a state we are not licensed in or someone in we will recommend you to a lender that we have worked with or that one of our guys have worked with in the past. We want to make sure the job is done correctly and out of the gate right. So please, do yourself a favor and deal with experienced people only.

So, those are two HUGE misconceptions.

The third misconception is that you are required to use only certain contractors.

That’s not true either! HUD and FHA do not certify contractors. The 203k Contractor Directory has a training program and certifies people as their certification, but HUD and FHA do not have a certification. So, again, our job as the lender is to make sure that your contractor understands and, at the end of the day, not every contractor is going to want to do FHA 203k mortgages. It’s very simple- it doesn’t work for everyone. Most contractors aren’t well-funded enough to be able to do them. Now it doesn’t mean anything is wrong with them as contractors because some of the best contractors out there we know don’t do 203k’s. At the end of the day, it’s not for everyone. So keep that in mind.

And those are a few misconceptions and we’ll come up with more as we continue to go forward. Keep these in mind. Feel free to reach out to us and have a great day.