There are two kinds of FHA renovation loans; a full 203(k) and a streamline 203(k). A major distinction between the two is how initial funds are released.  With a Streamline 203(k) funds are released in two installments, 50% at the closing and the remainder released at the end of the project.  Conversely with a full 203(k) funds are only released as work is completed.

Since there are no funds released up-front for a full 203(k) the contractor a borrower selects must have the financial wherewithal to carry the project until the first release. It is important when interviewing a contractor to make certain the contractor understands the cash flow process and that they can absorb the project's costs at the beginning phases. If not, a new contractor must be selected.