In the wake of Hurricane Harvey, the losses that homeowners and their families have experienced and continue to face are devastating. As the recovery continues in the Houston area, much attention is being paid to the help available to homeowners and landlords. But home-buying assistance for renters recovering from Hurricane Harvey has been getting less coverage.
Meet the FHA 203(h)
Most of the information online is geared towards people who already owned their home before the storm. However, a special loan called the FHA 203(h) loan is also available to people who were renting before the storm. This might be your moment to go ahead and buy your own home.
Thanks to the FHA 203(h), if you rented your home in Harvey’s path, this might be the time to consider buying your first home.
Yes, you are dealing with a lot right now. And buying your first home is a big deal in the best of circumstances. But…in order to help people get into permanent housing and rebuild their lives as quickly as possibly, many of the common barriers to first-time homebuyers are lifted for a limited period during a recovery like this one.
[A note about language before we continue. While we prefer to speak about the brave people who have survived the storm and continue to carry on to rebuild their lives, all legal documentation regarding the programs available to you use the term, “victim,” and so that is the language we will use here.]
The FHA 203(h): Home-buying assistance for renters recovering from Hurricane Harvey
Here’s what renters in Houston need to know about FHA 203(h).
Who’s eligible for the 203(h)
The FHA 203(h) helps victims in Presidentially-Declared Major Disaster Areas [PDMDA].
In non-lawyer speak, that means that your primary residence before the storm must be located within the area officially declared a disaster. And…the home you’re buying does not have to be within the disaster area.
What you’ll need to provide in order to apply for a 203(h)
You’ll need documentation proving that your home was in the PDMDA, and that it was damaged by the disaster.
To prove that your residence was in the PDMDA, go to https://www.disasterassistance.gov/ and enter in your address. There’s also a FEMA page that provides a wealth of resources for Harvey survivors, including the official PDMDA map of counties.
To prove that your home was damaged, you’ll just need to provide documentation from your renter’s insurance provider or your landlord.
What the 203(h) provides
The FHA 203(h) loan can cover 100% of the cost of purchasing your first home. That means that, rather than needing to have saved at least 5% of the cost of a new home, you can buy a home with no down payment at all.
And that’s any type of home — single-family property, manufactured housing, FHA-approved condominium, or planned unit developments [PUDs] — as long as it’s your primary residence [the home you actually live in].
How long it’s available
Understandably, in the days and weeks following a disaster, you are managing a lot. Not the least of which are your own stresses and emotions, likely along with your family’s. In light of this, eligibility for the FHA 203(h) begins the day that the President declares a disaster. And you continue to be eligible for one full year following the date of that declaration.
So if you need to get into temporary housing now, deal with the most urgent issues first, and then consider your long-term options, you can do so without worrying about having to rush toward this opportunity. It’ll be there for you when you’re ready.
The FHA 203(h) is especially helpful for renters buying their first home
This loan removes the common barriers to first-time homebuyers. The most important of which is this: there is no down payment required. [Interested party contributions are limited to 6%. So, the seller can’t cover more than 6% of the buyer’s closing costs].
Read on for a host of ways the FHA 203(h) helps first-time buyers, even if your credit isn’t perfect.
Your credit doesn’t have to be perfect to qualify for a 203(h) home loan
The FHA rules give lenders leeway here that they don’t have with other types of home loans.
You don’t have to have amazing credit. You do have to have a credit score of at least 580, and your lender can require that you have a score higher than that.
However, the lender can ignore credit issues that occurred after the disaster, as long as you had “satisfactory” credit prior to the disaster. It helps if you can provide proof that any credit issues that occurred after the disaster were in fact related to the disaster.
Late Rent Payments
The lender can disregard any late rent payments made within 12 months prior to the disaster. This is as long as the home you were renting was damaged or destroyed in the disaster…and you can provide a detailed explanation showing that late payments are due to the recent disaster.
Normally, you’d have to provide documentation that verifies your employment status, income, and value of any other assets.
In the wake of a Federally-declared disaster, these documents might either not exist or not be accessible.
In recognition of this, you can provide the FHA W-2s and tax returns to confirm your pre-disaster employment and income status.
Similarly, if documentation providing the value of any assets [that includes cash in the bank] is simply not available, you can provide your mortgage lender account statements downloaded from your financial institution’s website.
Additional info for Houston’s renters and homeowners
To learn more about the FHA 203(h) home loan, visit the FHA News Blog. Start with these two articles:
- What You Should Know About FHA 203(h) Loans For Disaster Victims and
- Can I Get An FHA 203(h) Rehab Loan With Bad Credit?
If you did already own your home before Harvey hit, you can find a wealth of information for homeowners via FEMA’s website. The Hope LoanPort [HLP] has resources via its HomeOwnerConnect.org website. And the Mortgage Bankers Association has excellent advice, including a listing of upcoming events for Houston homeowners and their families.
If you’d like help learning how the FHA 203(h) can help you recover from the devastating effects of Harvey by buying your first home, we’d welcome your call. Please drop me a note and we’ll get in touch with you asap.
Topics: Home Loans