Homestyle Renovation Loan Question

[Kevin Mehra]

Hello does anyone have experience with the Homestyle renovation loan?  I'm using this mortgage product to purchase a home and should be closing in a couple weeks but have ran into some unexpected closing cost. The lender is forcing me to put 10% of my renovation cost into a contingency account (which I knew about) and stated any unused money has to be put towards principal of the loan. They also stated I need to prepay for 6 months worth of mortgages payment upfront to be put it in an escrow account. I plan on living in the house during the remodel, as I am only doing cosmetic upgrades to kitchen and bathroom. Can the lender really force I put the unused contingency money towards the principal even though I funded it and force the prepay of 6 months of mortgages?