May 1, 2012
Every spring and summer, we report on local communities that become eligible for federal disaster relief, including FHA loans, FHA foreclosure relief and other types of assistance for those who have had homes damaged by natural disasters.
One of the most recent examples was our blog post on the relief efforts for those affected by storms in Hawaii, and unfortunately that likely won’t be the only such post we’ll have to make in coming months as tornado season and hurricane season for 2012 approach.
What does the FHA offer those affected by natural disasters? There are many programs, but one of the most widely used is the FHA’s Mortgage Insurance for Disaster Victims, also known as a Section 203(h) loan. According to the FHA, “This program helps victims in presidentially designated disaster areas recover by making it easier for them to obtain mortgage loans and become homeowners or reestablish themselves as homeowners.”
This FHA loan program is available only for those located in an area that was “designated by the President as a disaster area and were destroyed or damaged to such an extent that reconstruction or replacement is necessary.” The FHA official site says FHA-insured loans under this program, “may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner.”
FHA 203(h) loans are similar to FHA Section 203(b) loans, which are the typical FHA mortgage loans offered for single-family home purchases–also known as the FHA’s “basic loan program”. But the FHA 203(h) loan for disaster victims has one major difference.
According to the FHA official site, no downpayment is required for FHA 203(h) loans for disaster victims. FHA rules for these loans state clearly, “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 by the seller, subject to a limitation on seller concessions.”
The FHA adds, “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.”
The no-money-down option for FHA 203(h) loans is an important one–borrowers struggling to get back on their feet in the wake of a natural disaster need all the help they can get, the 203(h) program is designed to help without the added burden of a down payment requirement.
Do you have a question about FHA loans or FHA refinance loans? Ask us in our comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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