This Article Is About HUD FHA 203h Mortgage Guidelines For Disaster Victims:
Housing and Urban Development is the parent of FHA. HUD has a program to assist homeowners of natural disasters called FHA 203h loans. In this article, we will cover the following topics:
- What is the FHA 203h loan program?
- How does the FHA 203h loan program work?
- HUD Agency Guidelines on FHA 203h loans.
We will go over the basics of the 203h loan program and the eligibility requirements in this blog.
FHA 203h Loans Designed To Help Natural Disaster Victims
HUD FHA 203h Mortgage Guidelines For Disaster Victims allows homebuyers to qualify for FHA Loans with no down payment.
The 3.5% down payment requirement is waived for disaster victims under HUD FHA 203h Mortgage Guidelines. Per HUD FHA 203h Mortgage Guidelines, disaster victims can utilize FHA Loans on purchase, or homeowners can rebuild their properties after their homes have been damaged.
Every year, there are a few natural disasters in the U.S. The President of the United States is the person who is in charge of declaring a site a Natural Disaster Area. FEMA is the government agency that administers natural disasters.
Natural disasters are considered extenuating circumstances per HUD FHA 203h Mortgage Guidelines.
HUD FHA 203h Mortgage Guidelines On FHA Loans
HUD FHA 203h Mortgage Guidelines are similar to standard FHA Guidelines. The main difference is FHA 203h Loans allow 100% financing.
Here are the basic HUD FHA 203h Mortgage Guidelines:
The program is for home purchase and renovations of owner-occupant single-family homes. Buyers are eligible for 100% financing with no down payment.
Sellers’ concessions of up to 6% allowed for closing costs and pre-paid.
All FHA 203h Loans are manual underwriting. Recent late payments are exempt. Late payments are ignored by mortgage underwriters if the late payments were after the date of the disaster.
Late payment needs to have been caused by the displacement. Single Family Residence, Manufactured, FHA Approved Condos, PUDs all qualify for HUD FHA 203h Loans.
Primary Residence Owner-Occupant Properties Only.
Benefits Of HUD FHA 203h Loans
HUD FHA 203h Loans are available to existing homeowners and renters.
Available to renters as well as homeowners. Renters who are renting and whose rental unit got destroyed by a natural disaster can qualify for a home purchase FHA 203h Loan. No down payment is required. Late payments and derogatory credit is allowed if it was due to a natural disaster.
There is no expiration date to start the FHA 203h mortgage process. Renters can rent again and/or live with family and qualify for a 203h loan at a later date. Eligibility of the HUD FHA 203k Loan Programs begins as soon as the President of the United States declares the area as a Presidentially Declared Natural Disaster Area.
It remains effective 12 months from the declaration date. Homeowners can choose to rebuild their current home or purchase a new home.
Eligibility Requirements On FHA 203h Home Loans
To qualify for FHA 203h Loans, the area has to be a nationally declared disaster area by the President of the United States.
Disaster areas declared by state governors do not meet the FHA 203h Guidelines. The home can be an owner-occupant home and/or a rented home. The damage due to the natural disaster needs to be extensive that needs to be replaced than repaired.
Borrowers still need to qualify with income, liabilities, credit scores, credit history, assets. Borrowers need to live on the property. 580 credit score. Late payments after the disaster can be discounted by underwriters.
President Declaring National Disaster Areas
Here are examples of damages and when the President declares Nationally disaster areas:
- Flood and Structural Damages caused by Hurricanes
- Damages caused by Tornado
- Severe Storm
- High Water and flooding
- Wind-Driven Water Damage
- Tidal Wave and damage caused by this natural disaster
- Volcanic Eruption which is common in Hawaii
- Landslides which is common in California
- Mudslide which is common in California
- Drought is very common in Mountain and Western States
- Fire common in Calfornia
FHA 203h Mortgage Process After Natural Disaster
Most folks need to seek immediate temporary housing after a natural disaster.
Some move in with families. Others will rent hotel rooms. Yet others with limited and/or no financial resources will move to a shelter. Once their short-term housing situation has been stabilized, they will seek a longer-term solution like purchasing a new home or finding a rental.
Homeowners who had their homes damaged beyond repair can rebuild the existing lot. Rebuilding takes time so homeowners may want to purchase a new home. HUD FHA 203h loan program is not just for homeowners but for communities as well. It takes a community a long time to rebuild after a natural disaster hits home Borrowers do not have to purchase homes in the same area.
The borrower can qualify to purchase homes in a different area in the state. Or they can purchase out of state with FHA 203h Loans.
HUD FHA 203h Mortgage Guidelines make victims in natural declared areas qualify for home loans with 100% financing. Closing costs can be covered by the seller’s concessions and/or lender credit. It does need to be manual underwriting so borrowers need to meet manual underwriting guidelines.
July 19, 2021 - 4 min read