Most borrowers have heard of the FHA home loan program, but might not be aware that there are different types of FHA loans. FHA loans of all types are government-backed mortgages and often offer low down payments and great mortgage rates for first-time homebuyers. But if your home was destroyed by a natural disaster, the FHA 203(h) loan is a special program that can help.
Types of FHA Loans Programs
The FHA 203(b) Loan is the most common one as it’s available to almost anyone and requires a low payment of just 3.5% of the sales price. Due to the ease of qualifying and the low costs involved, it’s no wonder it’s the loan of choice for first time home buyers.
The FHA 203(k) Loan is another program that is used to buy a “fixer-upper.” This loan allows borrowers to finance both the purchase and home improvements all into one loan.
The FHA 203(h) Loan is used to help those who are disaster victims whose homes are destroyed. How does this program work?
FHA 203(h) – How it Works
If someone has lost their home in a major disaster such as a fire, hurricane or flood, this is a special loan program that requires zero money down. As long as the destroyed property was located in a federally delegated disaster area, this program can be a lifesaver. As long as the property was destroyed, the program is available. Homes that were located in disaster areas but not destroyed do not qualify. And like with other FHA loans, the 203(h) loan can only be used to rebuild a primary residence and cannot be used for a vacation home or rental property.
Besides the property being a primary residence, borrowers must provide evidence the home has been damaged to the point where it must be completely rebuilt or replaced. The program can be used to rebuild and replace on the current lot or buy a new home. Rates and terms for the 203(h) loan are primarily reserved to fixed-rate programs with terms ranging from 10 to 30 years in five-year increments. Loan terms include 10-year term, 15, 20, 25 and 30 years. Mortgage insurance is required with this program both an upfront premium that is rolled into the loan amount and an annual premium paid in monthly installments. Standard closing costs apply to this program as well. FHA loan limits also apply and can vary county by county.
We understand how trying to cope with such a disaster can be extremely difficult and losing one’s home is something that simply can’t be described in just mere words. But as it relates to getting those back into their homes and rebuild, let’s talk about this little-known FHA program designed for this very situation. You may not need this type of loan but in light of recent natural disasters, it’s likely you know of someone who could use this FHA loan. If you’d like to know more, let’s set up a time to talk and I can go over the basic guidelines, terms and options.