Contingency Reserve Requirements on Renonvation Mortgages


I’m staying with the “renovation” theme from my last several posts. This week I want to address a common question I get regarding one of the requirements on the Fannie Mae HomeStyle Renovation Mortgage, Fannie Mae HomePath Renovation Mortgage, and the FHA 203k Mortgage… “Why do these programs require a 10% contingency reserve?

The first thing I should do is define a contingency reserve. Fannie Mae and HUD (FHA loans) require a 10% contingency reserve on these renovation mortgages for unforeseen costs associated with the project.

The last thing anyone wants is to get into a renovation project on a tight budget with no additional assets and an unexpected problem occurs. Some potential issues that arise during a renovation cannot really be accounted for until the process is underway. That is why the 10% contingency requirement exists.

The contingency reserve is not an option. Since this is the case, a better question becomes “what happens to the 10% contingency reserve if it isn’t used?

As anyone who has gone through a renovation project on a home knows, most of the times costs end up going over budget, so it probably won’t be a problem. 🙂 In the event there are funds remaining, usually one of the following occurs with these three programs (203k, HomeStyle, HomePath):

  • additional work on the home – in some cases, the contingency reserve could be used to fund additional work on the home. If this isn’t allowed, then the other option is a…
  • principal reduction – the remaining funds are used to pay down the loan balance. Depending on the renovation program (and lender originating the loan), the borrower could request a recast of the mortgage. In other words, re-amortize the mortgage to lower the monthly payment
  • receive the contingency reserve as cash back – this is typically not an option for the borrower

Contingency reserves can be annoying, but they are definitely needed. As previously stated, the last thing anyone wants is to get near the end of the project and run out of money. What happens then? That is a scenario you never want to face!


Tags: , , , , , , , , , , , , , , , , , , , ,

24 Responses to “Contingency Reserve Requirements on Renonvation Mortgages”

  1. lasertest Says:

    After I originally commented I seem to have clicked the -Notify me when new comments are added- checkbox and now every time a comment is added
    I receive four emails with the exact same comment. There has to be a way you can remove me from that service?
    Many thanks!

  2. Wynajem Podnosnik Nozycowy Cena Says:

    After renting equipment, such as scissor lifts and you feel like you do enough projects
    to own, buy used equipment. Equipment rental companies understand the
    necessities for offering more than general
    tools, like forklifft rentals orr aerial lifts.
    You should always discuss tthe terms in advance and know what yr
    contract allows you to do.

  3. Says:

    Forget about traditional fashion rules and thhe Reverend Horton Heat.

    Logo imprinted t-shirts can be harmful to say thank you a led zepplin few
    extra bucks. Shirts are most popular exaples of custom tee-shirt, you can totally transforem
    any room whether youu enjoy this lovely top. You caan have
    your shirt size and the collar right around here.

  4. Massachusetts Says:

    The seller got pissed at us and refused to pay for the use of the laww firm to provide details.
    Beause many so-called” underwear bomber” Umar” in near past. This way a massachusetts criminal defense lawyer lawyer will not be possible. Camara seems to be informative and not get proper representation tto an example of corrupt and dishonest officers.

  5. unique gifts Says:

    Canada flowers delivery in Mumbai. The full set of binoculars that has
    helped the bottles stand special gifts up for the new in-thing
    and many mote ideas if your Mother? Buuy a gopd item to determine your stringing material.
    SideShow gadgetsSideShow gadgets mostly used for all tastes and interests because a lot of people?

  6. pasangtaruhan Says:

    Construct these in a corner of your lot, and keep them close together so that they do not
    take up too much of the lot’s space. By making sure that your
    belongings are safe and secure, you can enjoy your vacation with complete
    freedom without any worry. The final vote showed that 110
    tribal members were for the new casino and 110 members were against the casino.

  7. Jami Says:

    The core notion of online video marketing on YouTube is always to
    use the power of the site’s traffic.

  8. Reparatii Masini De Spalat Rufe Says:

    Cand masina de spalat nu lucreaza in bine iti recomandam sa apelezi la un service masini de
    spalat specializat, inca de la cele mai mici semne.
    Daca vei lasa lucrurile sa decurga asa, acestea se pot agrava si vei avea nevoie de si mai multe refaceri masini
    de spalat. Specialistii in reparatii masini de spalat vor
    stii mai bine ce probleme are aceasta si vor stii cum sa le rezolve in mod foarte rapid.
    Astfel, cu cat observi mai repede ca masina ta de spalat va avea
    probleme si suni la niste profesionisti in reparatii masini de spalat, cu
    atat vei salva si timp si bani.
    Fie ca te confrunti cu scurgeri minore sau cu alte probleme ce
    pot fi create de masini de spalat rufe, nu alege sa le ignori, pentru ca aca fosta vor
    avea urmari din ce in ce mai neplacute. De exemplu, daca nu iei in seama astfel de scurgeri minore, te poti trezi, in scurt timp cu o inundatie, asa ca e mai bine sa gasesti la cineva care
    se ocupa de depanari masini de spalat.
    Pentru a avea garantia ca masina ta a fost reparata in bine si ca nu se va deterioreaza
    in scurt timp, cel mai bine ar fii sa alegi la un service masini de spalat profesionist.

    Daca te temi ca va trebui sa transporti masina de spalat la sediul
    unui service de masini de spalat, poti alege un service ce ofera posibilitatea de a efectua orice fel
    de refaceri masini de spalat la domniciliu, daca acest lucru va fi posibil.
    De asemenea, exista astfel de incaperi specializate in depanari
    masini de spalat haine care asigura transportul gratuit al masinii de spalat la
    sediul service-ului pentru a fi reparata in mod rapid.

  9. Jets Giants 2015 Says:

    Watching Hindi movies online facilitates if for several reasons you are related to India:
    possibly your family is from this nation and also you have few friends in India or you are a fan of some Bollywood actor or actress.
    The film is late Paul Walker’s last excursion and his character Brian O’ Connor will resign from the arrangement.
    Visual impacts were dazzling, the story was cleared
    of religious BS however much as could be expected.

  10. Dieta Herbalife Says:

    I think the admin of this web page is really working hard for his site, since here every
    stuff is quality based material.

  11. Elliott Says:

    Admiring the dedication you put into your blog and in depth information you present.
    It’s good to come across a blog every once in a while that isn’t the same old rehashed information. Fantastic read!
    I’ve saved your site and I’m including your RSS feeds to
    my Google account.

  12. muhammed is gay Says:

    I am truly grateful to the holder of this website who has
    shared this enormous piece of writing at at this time.

  13. Cherie Says:

    Hello there, I do believe your web site might be having browser
    compatibility issues. When I take a look at your website in Safari, it looks fine
    however, if opening in I.E., it’s got some overlapping issues.
    I just wanted to provide you with a quick heads up!
    Besides that, excellent website!

  14. mafia 3 torrent Says:

    David Bailey,’ Assaults on Computers: different press and using motorm4x get
    whole,’ gasoline, methane Symposium on Privacy and
    Security, 1984.

  15. Esther Says:

    Instead of calling up your dealer and shelling out an arm
    and a leg for new seats, you can simply slide a new set
    of seat covers directly over the old ones. It was founded in 1902 and today,
    AAA or Triple A has more than 50 million members.

    A Ford assembly line image from Wikipedia, author
    unknown, is shown below.

  16. m88 Says:

    What’s up it’s me, I am also visiting this site daily, this web site is actually good and
    the users are really sharing good thoughts.

  17. what do you think Says:

    If you want to know that I will put my mind and well being and health issues
    over a regular diet? It’s not difficult consume less, move more,
    does anybody have any questions about how to eat denatured foods.

    The advice to dropping those couple of weeks,
    what do you disease know?

  18. Genius Pay Days huge discount Says:

    They have their priorities set on ensuring that their redgular sources of
    fees and charge are kept at comfortable levels rather tha take real risks in investments backed by research and
    expert analysis. If you’re not spending a huge amount of your
    time your profit margin coulld rise considerably and leave
    your account too expensive; remember you will also have to contend with the prices that othger gamers
    are offering. This is because they mayy be of work for a boss, waking very
    early in the morning.

  19. m88 Says:

    Awesome! Its truly amazing article, I have got much clear idea about
    from this article.

  20. best stainless steel cookware sets reviews Says:

    best stainless steel cookware sets reviews

    Contingency Reserve Requirements on Renonvation Mortgages | The Mortgage Blog

  21. Says:

    What’s up, every time i used to check web site posts here early in the dawn, as i enjoy to gain knowledge of more
    and more.

  22. Says:

    Fine way of describing, and good ppost to obtain information on the topic of
    my presentation focus, which i am going to present in university.

  23. Dick Says:

    You’re so interesting! I don’t think I have read something like this before.

    So good to find someone with some original thoughts on this topic.
    Really.. thanks for starting this up. This site is something that’s needed on the internet, someone with a bit of originality!

  24. Littlest Pet Shop Sex Fanfiction Says:

    I do not even know how I stopped up right here, but I thought this publish was once good.
    I don’t know who you’re but definitely you’re going to a well-known blogger if you
    happen to aren’t already. Cheers!

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: