What does it mean to be “out of balance”?

Being out of balance means you don’t have enough funds remaining in the loan based on the costs needed to complete the project.  This generally occurs when the costs of the project have increased from the original budget.

For lenders it is important that there are sufficient funds available in the loan to complete the project in case the homeowner does not complete the project.  This way the lender can use the funds set aside to complete.  Lenders never want to take back a home much less an incomplete home.

When a loan becomes out of balance, it needs to be remedied to get back in balance.  Typical remedies include having the homeowner bring in cash or have the builder reduce his or her fee to make up for the cost increase.