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General
Program Requirements
To be eligible for this mortgage program your home must be located
in an area that was designated by the President as a disaster
area and your home was destroyed or damaged to such an extent
that reconstruction or replacement is necessary. Insured mortgages
may be used to finance the purchase or reconstruction of a one-family
home that will be the principal residence of the homeowner under
the section 203h mortgage.
Like the basic FHA mortgage insurance program it resembles (Section
203(b) Mortgage Insurance for One- to Four-Family Homes), Section
203(h) offers features that make homeownership easier:
- No
downpayment is required for the section 203 h mortgage program.
The borrower is eligible for 100 percent financing. Closing
costs and prepaid expenses must be paid by the borrower in
cash or paid through premium pricing or by the seller, subject
to a 6 percent limitation on seller concessions.
- FHA
mortgage insurance is not free. This is true also for the
section 203h mortgage program. Mortgagees collect from the
borrowers an up-front insurance premium (which may be financed)
at the time of purchase, as well as monthly premiums that
are not financed, but instead are added to the regular mortgage
payment.
- With
the Section 203h mortgage program some fees are limited. FHA
rules impose limits on some of the fees that lenders may charge
in making a mortgage. For example, the lender?s mortgage origination
charge for the administrative cost of processing the mortgage
may not exceed one "point"?that is, one percent
of the amount of the mortgage excluding any financed upfront
mortgage insurance premium. In addition, property appraisal
and inspection fees are set by FHA.
- HUD
sets limits on the amount that may be insured under the section
203h mortgage program. To make sure that its programs serve
low- and moderate-income people, FHA sets limits on the dollar
value of the mortgage. These figures vary over time and by
place, depending on the cost of living and other factors (higher
limits also exist for two- to four-family properties).
To get the current loan limits for your area by zip code go
here.
Eligible
Participants:
FHA-approved lending institutions, such as banks, mortgage companies,
and savings and loan associations, are eligible for Section
203(h) insurance.
Eligible
Customers:
Anyone whose home has been destroyed or severely damaged in
a Presidentially declared disaster area is eligible to apply
for mortgage insurance under this mortgage program.
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