My consultant wanted me to use a 20% contingency but my loan was too high already and that would kill it for me. It would just make my payment too high for my comfort level.
When a home is 75 years old and older we like to see 20% contingency
as we have a good indication that there will be issues that come up
during the course of construction that will need to be addressed. Buyer
Where does the money come from if I don't have enough contingency reserve?
I get this question now and then. I ask the client "who's house is
it? Then they remember that I told them the answer to that question at
the time of the consultation. The contingency is a stop gap measure to
provide emergency money in case the project has an overrun. It is the
borrower's responsibility to either borrow enough or pay from other
funds if there is a shortage.
All of us involved with the transaction know what a burden it could
be for a borrower to come up with more funds during the course of
construction. In most cases it is nearly impossible
What are our options if we run out of contingency on our 203k project?
Title I loans are available for these times, hard money may be an
option in some cases. Title I loans are FHA loans that we used to call
"signature loans" as they were typically pretty easy to get but after
2004 they, like all other loans had a tightening and are a little more
difficult to obtain but not impossible. A Title I loan can only be used
if the work is distinctively different in scope than that of the FHA
203k. You cannot and must not overlap the work so be very careful on
this description of the work to be completed that it doesn't mimic the
original scope of work. Document it with photos and explain it well.
Mike Young, 203k Team Leader
With offices coast to coast and HQ now at PMB
168, 5055 Business Center Drive, Suite 108 Fairfield, CA 94534
1.707.812.7668. We have ten offices in CA covering both CA states,
NorCAL and SoCAL
To learn more about the FHA 203k loan program go to www.203kOnLine.com. To contact us for a consultation please go to www.my203kconsultant.com and "order a consultation". If you like what you see here please take a look at Another blog by Mike Young in Spanish and other languages.
Skype name: the203kconsultant