203(K) TERMS IN PLAIN ENGLISH
The words you will hear from your lender and consultant, defined simply so you know what they mean.
THE TERMS, DEFINED
Bid
The contractor's itemized price for the renovation work. A 203(k) bid breaks the project into line items like demolition, framing, plumbing, electrical, and finishes, each with its own cost. The lender and consultant use the bid to set the renovation budget and the draw schedule.
Work write-up
The written scope of work the 203(k) consultant prepares on a Standard 203(k). It lists every repair and improvement, the materials, and the methods. The contractor's bid has to match the work write-up so the loan stays aligned.
203(k) consultant
A HUD-approved professional who, on a Standard 203(k), writes the work write-up, inspects the work at each milestone, and signs off before each draw releases. The consultant is separate from the lender and the contractor.
Draw
A portion of the renovation funds the lender releases after completed work is inspected and approved. Draws are tied to milestones, so the money comes out in stages as the work progresses, not all at once.
Draw inspection
The inspection that happens before a draw pays out. On a Standard 203(k), the consultant inspects the completed milestone and confirms it matches the work write-up before the lender releases that portion of the funds.
Contingency reserve
A portion of the renovation budget held back for work the consultant expects to find but cannot see, like rotted framing behind a wall. If that work is found, the reserve covers the repair. If it is not, the reserve is handled per the loan terms.
Limited 203(k)
The simpler path, for nonstructural work. No consultant is required, and the total rehab cost is capped. It suits smaller jobs like kitchens, baths, flooring, and minor repairs.
Standard 203(k)
The path for major and structural work. A 203(k) consultant is required, writes the work write-up, and inspects each milestone. It suits projects that move walls, fix structure, or address major systems.
Change order
A written change to the scope after the bid is set. Change orders add, remove, or alter work and adjust the cost. On a 203(k), change orders have to be documented and approved so the loan and the draw schedule stay aligned.
Closeout
The final stage, when the work is finished, the final inspection passes, and the contractor delivers the closeout documentation the lender needs to release the last draw. It includes as-built records, manuals, and lien releases.
203(k) DisclosureEliteco Builders is a licensed general contractor, not a lender, mortgage broker, or HUD consultant. Nothing on this site is lending or financial advice. Loan programs, limits, and eligibility are set by HUD and your lender. Talk to an FHA-approved lender for financing details. For federal guidance, visit hud.gov.