Why is there a 10% holdback on the standard FHA 203(k) program?
The 10% holdback is used to protect the borrower by helping to ensure all of the work is completed. The holdback affects all parties and all draws. Upon successful completion of all work, the holdback is paid to the respective parties. There is no holdback on a Streamlined 203(k) since only 50% of the funds are disbursed before the work is completed, and as a result the balance serves as the holdback.
