Standard 203(k) contingency reserve
The Standard 203(k) mortgage requires a contingency reserve. The contingency reserve refers to funds that are set aside to cover unforeseen project costs (i.e. termites and/or damage).The minimum and maximum Contingency Reserve is established as a percentage of the Financeable Repair and Improvement Costs.
For Structures with an actual age of 30 years or more:
• Required: Minimum = 10%; Maximum = 20%
• Required when utilities are not operable as referenced in the Work Write-Up: Minimum 15%; Maximum = 20%
For Structures with an actual age of less than 30 years:
• Required when evidence of termite damage: Minimum = 10%; Maximum = 20%
• Discretionary: No Minimum %; Maximum = 20%
Limited 203(k) contingency reserve
A contingency reserve is not mandated for a Limited 203(k) transaction; however, at the lender's discretion, a contingency reserve account may be established and financed. The contingency reserve account may not exceed 20% of the Financeable Repair and Improvement Costs.The maximum rehab expense for a 203k limited loan is $35,000. If the repair costs exceed $35,000, the Standard 203(k) loan is required.
No comments:
Post a Comment