What Are FHA 203h Loans & Qualification Requirements

This BLOG On What Are FHA 203h Loans & Qualification Requirements Was UPDATED On October 08, 2017

Folks who are or have been a victim of a major disaster are and the President of the United States has declared it as a disaster area will be able to qualify for FHA 203h loans. 2017 is one of those years that set record number of category 5 hurricanes in Texas, Florida and almost devastated the Island of Puerto Rico.

  • 203h Loans allows home buyers to purchase a home with no money down via a FHA insured mortgage loan. 
  • 203h loans are for both purchase and refinance mortgage loan borrowers. 
  • On the purchase side, 203h loans applicants can be existing home owners who got their homes devastated by a natural disaster or it can be renters who have had their rental units destroyed.

FHA 203h Loans And Qualification Requirements

To qualify for 203h loans, the mortgage loan applicant needs to have their homes damaged by a natural disaster. 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 a FHA insured mortgage loan with no money down and need to have had timely payment history prior to the actual natural disaster. 
  • Late payments after the disaster is allowed and is considered that they were victims of the natural major disaster. 
  • 203h loans need to be initiated anytime from the date of the major disaster declaration date to a year of that date. 
  • FHA 203h loans mortgage application past the one year anniversary of the major disaster declaration date is null and void. 
  • Victims of Hurricane Sandy only have a few days left to apply for 203h loans.

Mortgage Loan Borrower 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 borrowers have been timely on all of their monthly credit obligations prior to the major natural disaster for at least 12 prior months. 
  • Late payments after the major natural disaster is allowed and acceptable. 
  • Maximum front end ratios are 31% debt to income ratios and maximum back end debt to income ratios are capped at 43%. 
  • No gift funds are allowed with 203h loans. 
  • Gift funds will most not likely be necessary due to the 100% financing and sellers concessions towards a buyers closing costs is allowed with 203b loans and is capped at 6% maximum. 
  • Like FHA 203b loans, any excess of sellers concessions need to go back to the seller and the borrower cannot accept any part of the sellers concessions.
  • Overages in sellers concessions can be used to buy down mortgage rates.

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