September 14, 2017
After Hurricane Irma and Hurricane Harvey, the Department of Housing and Urban Development has been issuing press releases as more federal disaster areas are declared in affected counties. When the government names such disaster areas, they become eligible for a variety of relief measures including FHA 203(h) loans for disaster victims.
During this particular set of disasters, there’s been a trend( in news media and among those affected by the hurricanes) to refer to those who have experienced them as “survivors” rather than “victims”. While that is acknowledged and respected here, the wording used in official FHA/HUD guidance such as the FHA Single Family Home Loan Handbook (HUD 4000.1) is “victims” and for accuracy’s sake that’s how we’ll reference the materials when quoting from and discussing these references.
What You Should Know About FHA 203(h) Loans For Disaster Victims
FHA 203(h) loans for disaster victims are similar to FHA 203(k) rehab loans, with one exception. FHA 203(h) loans are not open to any financially qualified applicant, but only to those in federally declared disaster areas. FHA 203(h) loans can be used to purchase a replacement home, rehab an existing home, or as a refinance loan.
FHA 203(h) Loan Application Deadline
HUD 4000.1 states that there is a specific time frame for applying for these loans. “The FHA case number must be assigned within one year of the date the (federal disaster area) is declared, unless an additional period of eligibility is provided.”
Occupancy Requirement
The borrower must live in the property to be purchased/repaired/rehabbed/etc in order to qualify for the FHA 203(h) loan program.
Property Eligibility For FHA 203(h) Loans
According to HUD 4000.1, “The previous residence (owned or rented) must have been located in a (federal disaster area) and destroyed or damaged to such an extent that reconstruction or replacement is necessary. A list of the specified affected counties and cities and corresponding disaster declarations are provided by the Federal Emergency Management Agency”.
FICO Score Requirements For FHA 203(h) Loans For Disaster Victims
FHA loan rules in HUD 4000.1 state that borrowers must have a minimum FICO score of 500 to qualify for this program. Lender standards may require higher FICO scores depending on the lender.
Down Payment Requirements
In some cases, a down payment (also known as the Minimum Required Investment) is not required for FHA 203(h) loans.
From HUD 4000.1, we learn “The Borrower is not required to make the Minimum Required Investment (MRI). The maximum Loan-to-Value (LTV) ratio limit is 100 percent of the Adjusted Value. If a 203(k) is used in conjunction with a 203(h), the 203(k) LTV applies.”
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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