With all the natural disasters in the news lately, plus areas with federal natural disaster declarations in Wisconsin, Maryland, and Montana counties, it seemed like a good time to discuss the FHA 203(h) loan program for disaster victims. The FHA/HUD official site summarizes the FHA 203(h) program as follows;
“The Section 203(h) program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home.”
Not everyone can apply for this particular FHA home loan program. According to FHA.gov, “Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area and if their homes were destroyed or damaged to such an extent that reconstruction or replacement is necessary.”
The FHA 203(h) program is different than ordinary FHA home loans because at the time of this writing, the loan rules for FHA 203(h) mortgages include no down payment requirement. “No downpayment 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.”
These terms are more generous than typical FHA loans because this loan program is designed to assist those recovering from a natural disaster. It’s understood that coming up with the FHA’s normally required 3.5% down payment would be a struggle for any home owner trying to rebuild after a storm, forest fire, mudslide or flood.
One of the most important features of the FHA 203(h) loan program is the time limit. FHA rules state, “The borrower’s application for mortgage insurance must be submitted to the lender within one year of the President’s declaration of the disaster.”
Don’t delay when applying for disaster-related assistance, whether it be an FHA 203(h) loan, FEMA assistance or any other related help. Your ability to claim such benefits may be more time-sensitive than you realize.
Do you have questions about the FHA home loan process? Ask us in the comments section.