5 Most Important Elements of the FHA 203(k) Bid (video)

Would you order a pizza without naming the toppings? Would you plan a trip without a road map (or at least an iPhone with a mapping feature)? Would you remodel your home and allow the contractor to make choose the design?

If you’re considering working with the FHA 203(k) Loan there are 5 important elements that you should consider. These choices should be made “before” you start construction and the earlier you nail them down, the better. Include the following as your road map to a successful remodel.

Read and see the video below. [hr]



FHA has 35 Mandated cost categories or what I call, “line items”. They help organize your project into sections that your lender’s underwriting department will use to help qualify the project. Later, during the draw and change order phase of the project, the categories are used as the basis for payment to your contractor.


This most likely will make the most sense to you, the buyer, because it’s the way you view your home. You want to remodel your “kitchen”. You want to redo your “bath”. Most home owners see things they either like or dislike about the location.

That kitchen counter top has got to go and I want to replace it with granite. That kitchen tile is so dated, let’s replace it with ceramic tile! Both of these items are located in the kitchen.

When describing your rehab bid you’ll want to include the location of each item being purchased with the loan.


Staying with the above scenario of granite, where do you want the stone? On the island? On the main counter? What about the back splash? Tile or granite? Clearly describe what you want, where you want it and in some instances, how much do you want (in terms of sq yards, sq feet, lineal feet, etc.). The more information you offer the contractor/consultant/lender the more likely they’ll be able to evaluate your project. That also applies to your appraiser and often times will be most important to you – the choices you make about the products you purchase can have a dramatic impact on your home’s value.


This section should be considered the fun part. It’s fun because color is closely related to emotion and textures can totally change the dynamics of a room or finish. What model dishwasher are you buying? What features does it have? What make/model garage door operator? What style shutters? Will you pick the color of the walls or would you allow the contractor to choose. What color and style roofing?


I’ve left the most important for last. This section doesn’t need much explaining. The rehab cost is directly connected to first 4 categories. Why? Simply because cost is totally dependent on ALL 4. Want an example? Let’s say you accept a price to remodel your kitchen that includes a budget for the cost of appliances. If you haven’t visited a show room and, at a minimum, evaluated their cost, how can you make an informed choice about the cost of the rehab?

Remodeling Expert Mike Otto shares a few tips about nailing down the cost of remodeling in his blog Fair and Square Remodeling:

1)      Ask for detailed plans – this ensures everyone will be on the same page

2)      Request a detailed scope of work be done – find out exactly what has to be done

3)      Insist on detailed pricing – every item in the scope of work should have a labor and material cost to it

4)      Have the contractor walk you through the detailed numbers – ask where changes to cost could be made

Begin to organize your rehab wish list very early in the remodel. Take your time and decide on textures, colors and styles. Consider engaging a professional decorator or designer. Designate some extra time to make smart selections. Gather as much information about the project “before” you meet with your contractor. You’ll be glad you did.

The most important element to remember about remodeling with the FHA 203(k) – Have Fun! [hr]


Watch this helpful video and contact me to get the FREEBuyer’s Wish List Excel Form.


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