The Section 203h program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims of a major disaster who have lost their homes and are in the process of rebuilding or buying another home. Through Section 203(h), the Federal Government helps survivors in Presidentially designated disaster areas recover by making it easier for them to get mortgages and become homeowners or re-establish themselves as homeowners. Anyone whose home has been destroyed or severely damaged in a Presidentially declared disaster area is eligible to apply for mortgage insurance under this program.
Type of Assistance
This 203h program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified disaster victims. Individuals are eligible for this program if their homes are located in an area that was designated by the President as a disaster area and if their homes were destroyed or damaged to such an extent that reconstruction or replacement is necessary. Insured mortgages may be used to finance the purchase or reconstruction of a one-family home that will be the principal residence of the homeowner. Like the basic FHA mortgage insurance program it resembles (Section 203 (b) Mortgage Insurance for One to Four Family Homes), Section 203 (h) offers features that make recovery from a disaster easier for homeowners:
- No down payment is required. The borrower is eligible for 100 percent financing. Closing costs and prepaid expenses must be paid by the borrower in cash or paid through premium pricing or by the seller, subject to a 6 percent limitation on seller concessions.
- FHA mortgage insurance is not free. Mortgagees collect from the borrowers an up-front insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.
- HUD sets limits on the amount that may be insured. To make sure that its programs serve low and moderate income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit can be viewed online. These figures vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two to four family properties).
203h Application Process
The borrower’s application for mortgage insurance must be submitted to the lender within one year of the President’s declaration of the disaster. Applications are made through Intercounty Mortgage Network, who make their requests through a provision known as “Direct Endorsement,” which authorizes them to consider applications without submitting paperwork to HUD. Mortgage insurance processing and administration for this and other FHA single family mortgage insurance products are handled through HUD’s Home Ownership Centers.
Guidelines and Requirements to Qualify for the FHA 203h Loan
- 100% Financing
- Up to 6% seller concession for closing costs
- Single family residence and condos allowed
- Must provide documentation to evidence permanent residence in the affected area before the disaster. (Drivers license, voter registration card, utility bills, etc.)
- Must provide documentation regarding the destruction of residence. (Insurance report, inspection report by an independent fee inspector or government agency, letter from FEMA)
- Homeowner or renter allowed
- More flexible debt-to-income ratio calculations
- This program may be used to purchase a home anywhere in the United States
Contact Anthony DiLeo at Intercounty Mortgage at (732) 264-2700 x18. Anthony is a resident of Ocean Gate NJ, a Presidentially declared disaster area due to Superstorm Sandy, and is experienced with and sensitive to your recovery needs. Homeowners are encouraged to also contact a HUD-approved housing counseling agency, for assistance with disaster related issues or call toll-free at: (800) 569-4287.