As disaster victims in several states start the process of rebuilding in the aftermath of the damage inflicted by hurricanes Irma and Harvey, FREEandCLEAR want to shine a spotlight on a government-backed home loan program that can help communities rebuild their homes as well as their lives.
The FHA 203(h) Program enables borrowers that live in Presidentially-designated disaster areas and whose homes were destroyed or seriously damaged to purchase a home with no down payment as compared to the 3.5% down payment required for a regular FHA mortgage and the 5% – 20% down payment typically required by conventional mortgage programs. The ability to get a home loan and buy a home with no down payment can help financially challenged disaster victims recover more quickly following a natural disaster.
Similar to the regular FHA Home Loan Program, other advantages of the FHA 203(h) Program include lower FHA interest rates and more flexible qualification guidelines, including a lower minimum borrower credit score. Additionally, the FHA 203(h) Home Loan Program does not require that borrowers maintain savings in reserve at the time the loan closes, lessening the financial contribution required to get a mortgage.
Another benefit an 203(h) Loan is that it can be used to both buy or reconstruct a home. The flexibility to utilize a loan for the reconstruction of a property is unique to the the FHA 203(h) Mortgage Program and highly valuable in areas that are rebounding from severe damage caused by a natural disaster. The program also applies to both purchase loans and refinances, further enhancing its flexibility and value to borrowers. To summarize, the FHA 203(h) Program makes buying or rebuilding a home more affordable for natural disaster victims.
Among the handful of negatives of the FHA 203(h) Home Loan Program, borrowers are required to pay an upfront and ongoing mortgage insurance premium. The ability to buy a home with no money down plus lower FHA interest rates balance the extra cost to borrowers. The FHA also applies mortgage limits that restrict the size of loan you can obtain. Borrowers that reside in high cost communities may find that the FHA mortgage limits restrict their home purchase or rebuilding options.
To make it easier for borrowers to apply for the FHA 203(h) Program, HUD has implemented procedures to accelerate the mortgage process. Lenders with a direct endorsement from the FHA are allowed to review a loan application without sending additional documents or information to the FHA. This approach streamlines the loan application process so that disaster victims can re-establish their roots faster.
You can apply for the FHA 203(h) Mortgage Program through FHA-approved lenders such as banks, mortgage banks, mortgage brokers and credit unions. Please note that only FHA-approved lenders can offer the FHA 203(h) Program. Borrowers should confirm that their lender is approved by the FHA before submitting their loan application. To be eligible for the FHA 203(h) Home Loan Program, borrowers are required to submit their loan application within one year of the President declaring a county a disaster area.
Please visit FREEandCLEAR’s comprehensive overview of the FHA 203(h) Program for more information.