Putting the FHA 203(h) Mortgage to Work for Disaster Victims

February 18, 2016

Did you know there is a specialty FHA loan program that allows 100% financing to help victims of disasters purchase a new home after their home was substantially damaged? The FHA 203(h) program was created specifically for this purpose.

Mortgage professionals often list helping people purchase homes they love among the most fulfilling aspects of their jobs. Working with someone who has lost their home, or had it rendered uninhabitable, and helping them purchase a safe home to live in can be a truly powerful experience.

In 2014 there were 84 disaster declarations according to data from FEMA, the Federal Emergency Management Agency. Causes included severe winter storms, severe tropical storms, flooding, earthquake, volcanic eruption, wildfires, and mudslides, among others.

203(h) Basics

  • Eligible properties include 1 – 2 unit primary residence, Manufactured Housing, FHA Approved Condominiums and PUDs.
  • he maximum LTV limit is 100% of the adjusted value.
  • Seller paid closing costs permitted, up to 6%.
  • The property must be the borrower’s principle residence – the previous residence (owned or rented) must have been located in a Presidentially Designated Major Disaster Area (PDMDA) and destroyed or damaged to such an extent that replacement is necessary.

FHA 203(h) Benefits

  • Available to renters as well as homeownersRenters who are displaced by a disaster may be eligible to purchase a new home with 100% financing through this program, rather than needing to put 3.5 – 5% down as would likely be required through most FHA or Conventional financing.
  • Does not need to be used right away
    In the days and weeks immediately following a disaster it may not be possible or prudent to focus on the next steps towards establishing long term housing or homeownership. Thankfully eligibility for this program begins as soon as the President declares the disaster and remains for one year from that date of declaration.
  • Option to rebuild or move on
    Financing is available for either rebuilding a home that was destroyed, or purchasing a new property.

Photography by [Alessandro Mascheroni] © 123RF.com

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