Disaster Area Victims - 203h Loan The Federal Housing Administration (FHA), in its continuing mission to provide homeownership opportunities to the American people, has a FHA loan program created for individuals or families whose residences were destroyed or damaged to such an extent that reconstruction or replacement is necessary are eligible for 100 percent financing. It's called the FHA 203h program. The 203h program offers 100% financing for purchase loans only. The new home doesn't even have to be located in the area where the previous home was. Renters can also purchase a home through this program.
Type of Home Financing Assistance Offered
The 203h program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified disaster victims. Insured mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner.
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According to FHA, Section 203(h) offers features that make homeownership easier:
No down payment is required. The borrower is eligible for 100 percent financing. Closing costs and prepaid expenses must be paid by the borrower in cash or paid through premium pricing or by the seller, subject to a 6 percent limitation on seller concessions.
FHA mortgage insurance is not free. Mortgagees collect from the borrowers an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.
Some fees are limited. FHA rules impose limits on some of the fees that lenders may charge in making a mortgage. For example, the lender’s mortgage origination charge for the administrative cost of processing the mortgage may not exceed one "point"—that is, one percent of the amount of the mortgage excluding any financed upfront mortgage insurance premium. In addition, property appraisal and inspection fees are set by FHA.
HUD sets limits on the amount that may be insured. To make sure that its programs serve low- and moderate-income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit ranges from $200,160 to $362,790. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two- to four-family properties).
Eligible Properties
This mortgage may be used for the purchase or reconstruction of a single-family home the will be the principal residence of the homeowners. The following are what the FHA allows families to buy under the 203h loan:
1-unit detached primary residences
Detached Planned Unit Development (PUD) - a home within a mixed-use land area containing such things a housing, recreation, commercial centers and industrial parks within the same development or subdivision
FHA-approved Condos
Ineligible Properties
The following below outlines the property types that are not eligible for a disaster relief mortgage.
1-unit attached primary residence
Attached PUD
2-4 unit primary residence
Second homes
Investment properties
CO-OPS
Manufactured homes
Applying for a 203h Home Loan
If your credit history is good prior to the disaster, but has any derogatory credit subsequent to that date can be related to the effects of the disaster, you could still qualify for the 203h loan. The borrower’s application for mortgage insurance must be submitted to the lender within one year of the President’s declaration of the disaster. Applications are made through a FHA-approved lending institution, which makes their requests through a provision known as "Direct Endorsement." The Direct Endorsement authorizes them to consider applications without submitting paperwork to HUD.
Disaster victims with Secretary-held mortgages are eligible for new FHA-insured mortgages provided the borrower is current with the forbearance agreement at the time of the disaster and all payment for the preceding twelve months were made within the month due. But, they too also need to apply through a FHA-approved lending institution within one year of the President’s declaration of the disaster.
