10/13/2024
The FHA 203H Disaster Relief Mortgage Explained
The FHA 203H renovation loan program allows FHA to provide renovation and repair financing to victims of a major disaster who have had their homes substantially damaged or flooded. The recent hurricanes and tornados have devastated many parts of the southeast. The FHA 203H loans are designed to help homeowners put back together the pieces and rebuild after hurricane or tornado caused wind, flood, or fire damages.
FHA 203h Purpose:
• The FHA section 203H program allows FHA to insure mortgages through approved lenders and banks to victims of a major disaster like hurricanes, fire, or floods who had their homes substantially damaged.
• This program helps victims in presidentially designated disaster areas recover by making it easier for them to get mortgages or refinances and or re-establish themselves as homeowners.
• The borrower’s mortgage application must be submitted to an FHA approved lender within one (1) year of the President’s declaration of the disaster.
• Any eligible home that has been destroyed in a disaster area is eligible to apply for mortgage insurance under this program, whether they owned the home or were renting it.
• This program is being offered for both purchase and refinance transactions.
• Renters who are displaced by a disaster may be eligible to purchase a new home with 100% financing through this program and will not require the typical 3.5% down payment requirement that comes with the standard FHA mortgage.
FHA 203(h) Benefits:
• Eligible borrowers may receive financing up to 100% of the purchase price.
• 15 and 30-year fixed terms available.
• Section 203H loans require Mortgage Insurance as regular FHA loans. This is to be paid upfront and can be added to the borrower’s loan amount.
FHA 203(h) Loan Eligibility:
• 580 minimum FICO score is the lowest score for an FHA loan. The credit requirements for this program are more relaxed when compared to standard FHA loans. Late payments related to as a result of the disaster and missed work are often overlooked.
• Your previous residence must have been located in a Federally declared disaster location and be damaged to such an extent that rebuilding or replacing is necessary. The borrower has up to 1 year to file for a 203H mortgage from the date of the disaster.
• It is important that you document residency and save any insurance claim forms, FEMA documentation, photos, and other important information if possible.
• 203H loans are for owner occupied properties only.
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Eligible FHA 203h Property Types:
• Principal Residences – Single-Family Homes.
• Single family units that are not attached are eligible.
• FHA-approved established condominium projects can be included.
Properties that are not eligible are:
• Investment Properties
• Second Homes
• Attached Properties
• 2,3,4 Units
• Co-Ops, Condotels, Timeshare
• Mobile and Manufactured homes are not eligible.
FHA 203H Loan Limits:
The new 203H mortgage is limited to the maximum FHA loan Limits for the area where the home is located.
FHA 203k Renovation Mortgage:
The 203k is an FHA renovation loan where you can purchase a home “AS IS” that needs major repairs or just some overall remodeling.
Most lenders require a minimum credit score of 620 and the downpayment is 3.5% of the purchase price and the renovation budget. You can also refinance the existing mortgage and get the funds for the renovations built into one 30-year mortgage. Applying for a new 203k allows you to spread out the repairs over a 30-year period which helps keep the mortgage payment lower.
Either way, there is renovation\repair financing available that people can tap into without regard to any insurance that might be on the home. We typically recommend that anyone in need of rebuilding their homes go ahead and refinance into a 203k. That allows you to get under construction within 30 to 45 days. When you finally settle up with the insurance company, those funds can be used to pay down the principal on the mortgage or go out and buy a new car. The 203k has nothing to do with the insurance proceeds that may come a year later. This is the fastest way to get the funding you need going forward and the fastest way to get back into your home.
Now a little about our company
I have been a 203k Construction Consultants for 12 years now and have hundreds of renovation projects that I have been a part of.
As a 203k Construction Consultant, we work directly for the borrower. What we do is a mini–Home Inspection of the property to identify what mandatory items need to be included in their construction budget. Once we have identified those items, we take into consideration whatever the borrower’s desires are.
When the scope of work is dialed in, we generate an unbiased cost estimate based on what we believe the average contractor would change to perform that degree of work. So, there is no need for a Home Inspection or contractors’ bid.
Once the borrower approves the final draft, we send all the reports to not only the borrower, but to the lender also. Included in our final package will be a duplicate of our bid but it does not print the dollars. That is the document given to the contractors to bid on. The lender will give our report to the Appraiser, and they will appraise the home as after improved and not as is. At the same time, the borrower will select the contractor with which they are most comfortable.
After closing, anytime the contractor wants to get paid, they must call us. We will come out and inspect the work that is in place. We not only verify the quantity of work they have completed but also the quality of the work. We then authorize the release of the funds to pay the contractor. The 203k Construction Consultant is involved from conception to completion and are the only boots on the ground protecting the borrowers.
If your go to lender does not offer these loans, we can refer to incredibly good renovation loan lenders across the country. We also have a list of local renovation contractors that we see all the time here in Florida. They understand these programs and are incredibly good renovation contractors.
We realize this is a lot of information, so we are always available to answer questions and assist you in getting this renovation deal structured or completed. Feel free to reach out if you have any questions or concerns, as we are here to help you realize your American dream.
Stephen Cantelli
603-918-6071
[email protected]
HUD
