Part I: The Hidden Make-or-Break of a 203(k) Rehab Loan: Change Orders & Contingency

Most 203(k) articles explain what the loan is and list what it can cover. Useful… but incomplete.

Because the real reason many 203(k) projects get stressful isn’t the paint color or even the contractor—it’s this:

Renovations rarely go exactly as planned, and 203(k) money can’t just “move around” casually.

That’s where change orders and contingency reserves come in.

If you understand these two concepts early, you avoid the most common “we’re stuck” moment in a 203(k) rehab.

Because if the project discovers a required repair that wasn’t in the original plan, you can’t always:

• instantly add more loan funds, or

• freely reallocate money from unrelated line items

If there’s no buffer, you may end up with:

• stalled work while approvals happen

• gaps between contractor payments

• uncomfortable “who pays for this?” moments

When a surprise pops up, these three things get squeezed:

1. Time: work pauses or slows

2. Paperwork: revised scope, revised bids, approvals

3. Money: contingency or change order funding must be structured correctly

The magic is not “avoiding surprises.”
The magic is building a rehab plan that can absorb them.