FHA 203(k) Contractor Approval | The 2 Mortgage Guys

Your Pick, Lender Approval

FHA 203(k) does not assign a random builder. You interview and select contractors. What changes vs. a cash remodel is documentation: licenses, insurance certificates, itemized bids, and — for Standard — consultant review of the work write-up.

Incomplete or uninsured bids stall underwriting and draws. Getting credential packages early keeps Limited closings fast and Standard consultant packages clean.

Ryan and Steve coordinate what your lender needs so contractors know the escrow and inspection rhythm before they start.

At a Glance

Who selectsBorrower chooses

Limited 203(k)Up to 3 contractors

ConsultantNot required on Limited

Who approvesLender (+ consultant on Standard)

LicenseState / trade required

InsuranceLiability + workers’ comp

BidsItemized, escrow-ready

DIY workNot allowed in escrow

What Approval Usually Checks

Licensing & identity

Active state or local licenses for the trade, W-9, and contact details that match the bid and draw payee.

Insurance certificates

General liability and workers’ compensation at required limits, with the lender or borrower listed as certificate holder when asked.

Itemized scope & cost

Line items that map to eligible improvements — not vague lump sums that underwriters and consultants cannot inspect against.

Timeline & permits

Realistic completion window inside the lender’s rehab deadline, plus permit responsibility clear on the bid.

Approval Sequence

Collect bids & credentials

Licenses, insurance, and itemized proposals before the appraisal locks after-improved value.

Consultant / lender review

Standard 203(k) consultant write-up plus lender overlay checks; Limited uses a lighter document set.

Close, then draw on inspection

Funds stay in escrow until inspected milestones are met — contractors are paid per approved draw, not a lump sum at closing.

Keep Exploring

Can I Do the Work Myself?

Why DIY usually stays outside the 203(k) escrow.

How Are Funds Distributed?

Draws paid as inspected work is completed.

Is a Consultant Required?

HUD consultant role on Standard 203(k).

What Improvements Can Be Financed?

Eligible work contractors will bid.

Contractor Approval on Renovation Loans

Cross-program contractor requirements.

Frequently Asked Questions

Do I pick the contractor or does the lender?

You select licensed, insured contractors. The lender (and on Standard 203(k), the HUD consultant) reviews bids, credentials, and insurance before work is approved for the escrow.

How many contractors can I use on Limited 203(k)?

Up to 3 contractors are permitted on Limited 203(k) Streamline. Each must be licensed, insured, and approved by the lender before draws begin. No FHA 203(k) consultant is required on Limited.

How many contractors on Standard 203(k)?

Standard 203(k) requires one general contractor, with specialty contractors permitted as needed. A HUD-approved 203(k) consultant is required and helps review bids against the work write-up.

What insurance must contractors carry?

Expect general liability and workers’ compensation at levels the lender requires, plus any state licensing for the trade. Proof must be current before draws begin.

Can family members do the work?

Related-party contractors raise conflict-of-interest flags. Some lenders disallow them for financed escrow work; others require extra documentation. Ask before writing a relative into the bid package.

How Are Contractors Selected and Approved for an FHA 203(k) Loan?