FHA Disaster Relief Mortgage (203h)
Hurricanes, more hurricanes, and wildfires. Unfortunately, 2017 has given us a few events that have led to Presidentially declared disaster areas. All of these events have unfortunately resulted in loss of life, and loss of property. In events designated as federal disaster areas, HUD has a little-known program to help those who have lost their primary residence due to disaster – the FHA 203(h) mortgage loan. This mortgage program is intended to offer those effected by a disaster an opportunity to purchase a new primary residence with $0 down payment required.
Who Can Benefit?
Renters AND home owners who lost their primary residence due to disaster can apply and obtain financing for a new primary residence with $0 down. Evidence must be provided that the destroyed property is damaged to the point where reconstruction is required, and that it was used as a primary residence.
Those home owners who lost their home and are opting to rebuild can also use the FHA 203(h) mortgage to purchase a residence to live in as their primary residence while they go through what can be a long process of insurance claims, permitting, planning, and reconstruction of their prior residence.
There is no geographic restriction on the FHA 203(h) loan, so for those effected, a new property may be purchased anywhere. After a disaster, many people opt to move elsewhere to avoid the likelihood of future disasters (for example, moving away from fire prone areas or coastal areas prone to hurricanes). In these cases, a new home may be purchased anywhere with $0 down if the former primary residence was destroyed.
The process of obtaining an FHA 203(h) mortgage is largely the same as obtaining a standard FHA loan. Credit guidelines are more lenient for 203(h) users when credit issues can be shown to have been caused by disaster, and the only additional paperwork is evidence that the former primary residence has been destroyed in a federally declared disaster area (when disaster strikes, these areas are listed at FEMA.gov).
Buyers opting to use 203(h) mortgage financing have up until 1 year from the time the disaster event was declared to begin the processing on their 203(h) loan.
The new property purchased can be a single family primary residence OR FHA-approved condo with loan amounts up to the local county limits and $0 down.
If the property effected by disaster had a mortgage on it, that mortgage does not need to be counted against the borrower when qualifying for their new loan if the buyer shows they’re working with that mortgage servicer to resolve the mortgage and insurance funds obtained from a claim on that property are applied toward the previous mortgage.
Where to get a 203(h) mortgage?
We’d strongly recommend working with your Mason Mac Loan Officer to get your 203(h) mortgage because a) we’re just a little biased, and more importantly b) our loan officers are all well trained and educated on the program and know how to navigate it from start to finish.
Not every lender offers the 203(h) mortgage loan product, so it’s important to find a lender that not only does the product, but a loan officer that is well versed in the product so they can guide you through an already difficult time with ease.
If you, friends, or loved ones have been effected by disaster and would like more information on the FHA 203(h) mortgage program, please give us a call or email your Mason Mac loan officer. We’re here to help and happy to answer any questions you have.