The Section 203(h) program allows the Federal Housing Administration (FHA) to insure mortgages made by qualified lenders to victims in a Presidentially designated disaster area. No down payment is required, 100% financing is available to borrowers. The program's purpose is to make it easier for victims of disaster to get a mortgage and become or re-establish themselves as homeowners.​
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In the immediate aftermath of a storm, those whose homes (rented or owned) who had significant damage will seek temporary housing for their own safety and that of their loved ones. Once the area becomes stable, their priority will shift to determining a plan for new permanent housing. The 203(h) program allows borrowers time to evaluate their options - it is available up to a year after the disaster area is declared.
The program also benefits local communities. Recovery is slowed when residents choose to leave and settle somewhere else. This program encourages victims to remain, commit to rebuilding, and provides them a financial tool to do so. Local businesses then can continue to operate as they retain access to employees and customers. Schools continue to have enrollment so they will continue to receive funding. Overall a sense of resiliency and pride in the community is fostered and grows. ​​
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Previous Residence (owned or rented) must have been located in a declared disaster zone (PDMDA) AND destroyed or damaged to such an extent that purchasing a new home is necessary
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Mortgage may be used for purchase or reconstruction of primary single family home.
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Primary Residence Only - borrower must intend to live in the home as their primary residence
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Up to 100% financing available - no down payment required
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Closing costs and prepaid expenses
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These must be paid by the borrower in cash, or paid thru premium pricing, or paid by the seller (up to a 6% limitation)
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FHA mortgage insurance
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An upfront premium is collected (which may be financed), as well as monthly premiums that are added to the regular mortgage payment
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Loan limit: FHA limits the dollar value of the mortgage
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The majority of Florida is set at $420,680. Check your specific location here
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580 minimum FICO credit score
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Fixed rate terms: 10 year, 15 year, 20 year, 25 year, 30 year, or 5/1 Hybrid ARM
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Single family residence, manufactured, FHA approved condos
* It is still necessary for the borrower to be approved for the new loan and to demonstrate that it will be affordable for the borrower. Income, assets, liabilities, and credit history will be evaluated, as will the market value and condition of the property to be financed. If rebuilding, the value taken into consideration will be the amount that the home will be worth in the current market once it is complete.
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**Underwriting can be slightly more flexible for FHA 203(h) loans as some of the traditionally required documentation may have been damaged or destroyed in the disaster. Credit and payment history will be considered satisfactory if the credit report indicates satisfactory credit prior to the disaster. The FHA will accept W-2s and tax returns from the IRS to confirm prior employment and income if records were destroyed. Asset statements may also be downloaded from the borrowers financial institution if traditional documentation statements were destroyed in the disaster.
WHAT ARE THE BENEFITS?
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No down payment!
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Time: Eligibility for this program begins as soon as the US President declares the disaster, and remains for one year from that date of declaration. This time is helpful as it may not be prudent to focus on the next steps toward establishing a long term housing plan in the days and weeks immediately following a disaster
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Options: Financing can be used to either rebuild a home that was destroyed or to buy a new property
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Renters can become homeowners with 0% down: Renters who are displaced by a disaster may be eligible to purchase a new home with 100% financing through this program and be exempt from the 3.5% down payment requirement that comes with the standard FHA loan
PROPERTY ELIGIBILITY REQUIREMENTS
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​Previous residence (owned or rented) must have been located in a Presidentially Declared Major Disaster Area (PDMDA) and destroyed or damaged to such an extent that reconstruction or replacement is necessary
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The purchased or reconstructed property must be a single family property or unit in an FHA-approved condominium project
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The new residence being purchased does not need to be located in the PDMDA where the previous house was located
ALTERNATIVE PROGRAMS TO CONSIDER
If the FHA 203(h) loan does not meet the needs of the scenario, there are a few other options that may be a better fit:
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Financing for a home purchase and renovation:
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Zero money down:
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Low down payment without the declared disaster: