Picking the wrong contractor is the fastest way to kill a 203k deal. Here’s what the program requires from them, what the paperwork looks like, and how to vet a contractor before you’re stuck.
The absolute requirements
Every contractor working on a 203k-financed project must:
- Hold a valid contractor’s license in the state where the property is located
- Carry general liability insurance (minimum $1M, sometimes $2M depending on scope)
- Carry workers’ compensation insurance
- Provide a W-9 and completed Contractor Profile form
- Submit a detailed bid that matches the consultant’s Work Write-Up line-by-line
- Agree to the FHA draw schedule (paid in draws after inspections, not weekly or hourly)
- Commit to starting work within 30 days of closing
- Commit to completing work within 6 months (Limited) or 12 months (Standard)
What makes a contractor “203k-experienced”
Not every licensed contractor can handle a 203k. The difference is whether they’ve been through the paperwork and draw process before.
203k-experienced contractors:
- Know how to read a HUD consultant’s Work Write-Up
- Write bids that align with the Write-Up line-by-line (critical)
- Understand the draw schedule and don’t expect payment upfront
- Know how to request draws, what documentation triggers a draw release, and how long inspections take
- Have cash reserves to front materials between draws
- Know how to handle change orders mid-project without derailing the loan
The bid – what it needs to include
A 203k bid isn’t a one-page estimate. It’s a detailed scope document that includes:
- Line-item breakdown of every task (demolition, framing, electrical, plumbing, finishes, etc.)
- Material specifications (brands, models, quantities)
- Labor estimates per task
- Permits and permit fees
- Contingency line items where applicable
- Start and completion dates
- Total price that matches (within reason) the consultant’s cost estimate
The draw schedule
Contractors don’t get paid upfront. They get paid in “draws” as work milestones are completed and inspected. Typical schedule:
- Draw 1: Permit + initial demolition – usually 25% of contract
- Draw 2: Rough-in (framing, plumbing, electrical) – usually 40%
- Draw 3: Drywall + mechanicals – usually 15%
- Draw 4: Finishes (flooring, cabinets, paint) – usually 15%
- Final draw: Punch list + final inspection – usually 5%
On Limited 203k, there’s often a simpler 2-draw schedule (50% up front, 50% at completion).
Why contractors push back on 203k
Here’s what contractors don’t like about the program:
- No upfront deposit (they have to carry materials costs)
- Draws take 5–10 business days after inspection request
- Extra paperwork compared to a cash or private rehab
- Consultant oversight on Standard 203k
- Change orders require lender approval, which takes time
That’s exactly why contractors who DO know the program are worth their weight in gold – they’ve figured out how to manage their cash flow around the draw schedule.
Red flags when vetting a contractor
- “I’ve never done a 203k but I’ll figure it out” – Don’t. Too many moving pieces to learn on your file.
- Demanding 50% upfront – The program doesn’t allow this. If they won’t accept a draw schedule, they won’t make it.
- Bid doesn’t match the Work Write-Up – Dead giveaway they haven’t read it.
- No license number on the bid – Instant disqualification.
- Lapsed or expired insurance – Won’t pass lender verification.
- No reviews, no references, no visible business history – Walk away.
What the right contractor looks like
- Has completed 3+ 203k projects
- Can show reviews or references from 203k-specific projects
- Carries their license and insurance info ready to submit
- Submits a bid that matches the consultant’s Write-Up format
- Has a project manager who communicates clearly (not just the owner answering texts)
- Offers realistic timelines – not “we’ll do it in 6 weeks” on a 3-month job
- Has enough cash flow to handle material orders between draws
Our contractor network
Because we close so many 203k loans every year, we’ve built a network of contractors across the country who actually know the program. When you pre-qualify with us, we can connect you with a contractor in your market who’s done dozens of these – which cuts your risk of project failure dramatically.
How to find your own
If you want to find your own:
- Ask your consultant – consultants work with contractors constantly and know who’s reliable
- Search “FHA 203k contractors” + your city (but vet carefully)
- Ask local Realtors who specialize in fixer-uppers
- Check contractor reviews on multiple platforms, not just one
- Insist on seeing a previous 203k bid as a sample (without the pricing)
Bottom line
The contractor is where 203k deals win or lose. Paperwork, timelines, and payments are all keyed to their performance. Start vetting contractors the day you get pre-qualified – don’t wait until you’re under contract.