Many homeowners are unaware that FHA offers 203(h) disaster loans through approved FHA lenders and banks. If you have been a victim of a major disaster (Hurricane, Fire, Flood) declared as a disaster area you may be able to qualify for 203h loans which allow you to purchase a home with no money down - 100% financing. FHA 203h loans are for both purchase and refinance mortgage loan borrowers. For purchase transactions, 203h mortgage applicants can be existing homeowners who got their homes devastated by a natural disaster or it can be renters who have had their rental units destroyed.
203h Loans & Approval Requirements:
To get approved for 203h loans, the applicant needs to have their homes damaged by a natural disaster and their homes or rental unit needs to be listed as a major disaster area by the President and their county needs to be on FEMA’s list of major disaster declaration areas. They can qualify for an FHA insured mortgage with no down payment and should have good payment history prior to the actual natural disaster. Late payments after the disaster are permitted as this is not uncommon in a time of crisis. 203h loans need to be initiated anytime within 12 months of the disaster declaration date. 203h loan applications past the one-year anniversary of the major disaster declaration date are not permitted.
Home Buyer Qualification Requirements For 203h Loans:
Depending on the 203h loans mortgage lender, there are minimum credit score requirements. As stated earlier, 203h loans mortgage lenders require that you have been timely on all of your monthly credit obligations prior to the major natural disaster for at least 12 prior months. Maximum front end ratios are 31% debt to income ratios and maximum back-end debt to income ratios are capped at 43%. Home sellers can pay buyers closing costs up to 6%, just like regular FHA loans.
The Federal Housing Administration Section 203(h) is a Disaster Relief Program that addresses home loans designed for purchasers of single-family homes and FHA-approved established condominium projects. All properties must be used as primary residences. The following properties are ineligible for this program: investment properties, second homes, attached properties, 2-4 unit properties, manufactured homes, co-ops, condo tells, and timeshares.
Renters and homeowners who desire to purchase homes may take advantage of FHA Section 203(h) entitled Mortgage Insurance for Disaster Victims.
The 203(h) program provides the following benefits:
- Assists victims with substantially damaged homes that are in the process of buying another home
- Evidence of destruction is required
- Requires no down payment, minimum credit scores of 620, and maximum debt-to-income ratio of 31/43 percent
- Facilitates mortgages for renters and homeowners in the affected areas
- Requires buyers to pay closing costs and prepaid expenses or arrange for premium pricing; sellers may offer concessions (six percent limitation) but gift funding is not permitted
- Mortgage insurance premiums are paid upfront and monthly
- Home buyers can choose from the standard: 10, 15, 20, 25, and 30-year-fixed interest rate terms
The list of declared disaster locations is listed on the FEMA website. In addition, they also list the dates that each disaster was declared.
For more FHA loan details, please visit www.FhaMortgageSource.com or call 800-743-7556
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