Buy A Home After A Disaster With Government Help

Buying a home after a disaster seems like an overwhelming task, but the government provides some help through a FHA program, 203(h). By providing mortgage insurance to disaster victims, borrowers can finance the purchase of a home or rebuilding costs.

203(h) Details

After an area has been declared a disaster area by the President, victims in that area are eligible for the 203(h) program, which provides mortgage insurance. Since a disaster affects jobs, finances, and property risk levels, the government offers to absorb the risk for mortgage lenders. As a result, lending companies are willing to finance a mortgage to buy a home or rebuild.

Mortgage insurance is not free though. You will need to pay an upfront premium as well as monthly premiums. However, there are benefits to this program. For example, no down payments are required for this type of loan. Closing costs are to be paid in cash or as part of the loan premium, not to exceed 5%. Fees, including origination, appraisal, and inspection fees, are also set by the FHA.

FHA loans are targeted for low to mid income families, so mortgages are limited to $172,632 to $312,895 for a single family home. The loan amount depends on the cost of living in the area. For multi-family homes, the loan amount can be higher.

FHA Lenders

FHA mortgage lenders are private financing companies, including banks and mortgage companies, that have been approved by HUD to administer FHA programs. Just like with any type of mortgage, you should compare interest rates before committing to a lender. Online mortgage brokers allow you to quickly compare quoted interest rates.

You have one year to file an application for the 203(h) program with your mortgage lender after the disaster.

The Process

By using the FHA 203(h) program, you only add a little extra paperwork to ease your mortgage application toward acceptance. When you are applying for a loan, you will want to ask for the application for the mortgage insurance program. HUD approved lenders will submit the application through the proper channels. At this point the mortgage company will handle the rest of the process, you will just need to complete the final loan paperwork.