FHA 203(h) Rehab Loans for Federal Disaster Areas

In the wake of 2017 natural disasters like Hurricane Irma and Hurricane Harvey, the Department of Housing and Urban Development has published this year’s FEMA-listed federal disaster areas, which become eligible for a variety of relief measures once that designation is made for an affected area. Relief includes the availability of FHA 203(h) home rehab loans for disaster victims. What to Know About FHA 203(h) Rehab Loans for Disaster Victims FHA 203(h) loans for disaster victims are not available to all borrowers-only those in federally declared major disaster areas. They can be used to rehab an existing structure or to purchase a replacement home in the wake of the disaster. These mortgages are available as forward loans but also as refinance mortgages. FHA 203(h) Rehab Loan Application Deadline Rules to Remember There is a time limit for applying for FHA rehab loans for disaster victims. According to HUD 4000.1, “The FHA case number must be assigned within one year of the date the (federal disaster area) is declared, unless an additional period of eligibility is provided.” That means that it is better to act as soon as possible once you realize you need an FHA rehab loan. There are different declaration dates for areas affected by Hurricane Harvey, Hurricane Irma, and other disasters-and not all areas in a single state may have been declared at the same time. FHA Rehab Loan Occupancy Requirement Rules The borrower must live in the property to secured by an FHA 203(h) rehab mortgage in order to qualify for the loan. Those purchasing new property with the loan must occupy it within a reasonable time after the closing date of the loan. Those who are rehabbing a home should know that it’s understood that a home is not necessarily habitable during the repair phase, but occupancy after the work is done will be required. What Property Is Eligible for an FHA 203(h) Rehab Loan? There are definitely rules that apply for these mortgages borrowers should know before filling out loan paperwork. According to HUD 4000.1, “The previous residence (owned or rented) must have been located in a (federal disaster area) and destroyed or damaged to such an extent that reconstruction or replacement is necessary. A list of the specified affected counties and cities and corresponding disaster declarations are provided by the Federal Emergency Management Agency”. Credit Score Requirements for FHA 203(h) Loans For Disaster Victims As with all FHA loan products, lender standards in this area may also apply, but in general a minimum FICO score of 500 is required to qualify for this program.