The Section 203(h) 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.
What is the purpose of the FHA Section 203(h) Program?
Through Section 203(h), the Federal Government helps victims in Presidentially designated disaster areas recover by making it easier for them to get mortgages and become homeowners or re-establish themselves as homeowners.
The 203(h) loan program allows borrowers to have the mortgage payment on the destroyed home left out of debt calculations, making qualifying easier.
The borrower must document and verify their previous residence was in a Federal Disaster Area and was damaged/destroyed to such an extent that replacement is necessary. Documentation to this fact will need to be submitted with the application for purchase. The home being purchased does not need to be located in the area where the previous house was located.
The borrower must occupy the home they are purchasing as their primary residence. Single family homes and condos in an FHA-approved condominium project are eligible under the 203(h) program.
- No downpayment is required. The borrower is eligible for 100 percent financing.
- Closing costs and prepaid expenses must be paid by the borrower in cash (gifts are acceptable) or paid through premium pricing or by the seller.
- 15 and 30-year fixed rate terms are available.
- Application deadline is one (1) year from the date of the disaster declaration, unless specifically extended.
- Credit history is considered on a case-by-case basis and may be flexible for credit issues related to disaster.
- Underwriting guidelines may be relaxed regarding income verification and length of employment if affected by disaster.
- Check FHA loan limits for your California county.
Section 203(h) Refinancing
A refinance under Section 203(h) is permitted, but must be done in conjunction with a 203(k) rehabilitation loan. So, if the home was completely destroyed — or did not sustain the type of damage that can be repaired with a 203 (k) loan — it will not be eligible for a refinance under the 203(h) program.
We’re FHA experts
Sometimes navigating a lot of paperwork under an already stressful situation can be a real challenge. We get that. Also, government loan regulations change frequently, so it’s important to work with an approved lender who can access current and accurate information.
If you’d like to speak with some smart and caring folks who can clear away the jargon and explain FHA Section 203(h) mortgage insurance in simple terms, we can help.