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FHA No-Downpayment Loans Available to Hurricane Victims
Victims of Hurricanes Katrina and Rita whose homes need to be reconstructed or replaced can use the Federal Housing Administration's Section 203(h) program to obtain no-downpayment mortgages that can be used anywhere in the U.S.
The Department of Housing and Urban Development recently began publicizing the program, which provides FHA-insured loans for affected residents in Presidentially-declared disaster areas.
Borrowers must be able to qualify for FHA mortgages, HUD said, and the mortgage amount is limited to no more than $312,895, depending on the average sales prices in the area.
Borrowers who use the 203(h) program customarily finance the up-front mortgage insurance premium as part of the loan.
The Section 203(h) program resembles Section 203(b), the primary FHA mortgage insurance program, except for the no-downpayment provision. Among other features of the loan program:
- Owners or renters who have lost their homes must apply to an FHA-approved lending institution — such as a bank, mortgage company or savings and loan institution — within one year of the President’s declaration of the disaster.
- 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% limitation on seller concessions.
- The up-front insurance premium is 1.5% of the mortgage amount, and the monthly premium is .5%.
- FHA rules impose limits on some of the fees that lenders may charge in making a mortgage. The lender’s mortgage origination charge may not exceed 1% of the amount of the mortgage excluding any financed upfront mortgage insurance premium. In addition, property appraisal and inspection fees are set by the FHA.
More information on 203(h) can be obtained from the HUD National Servicing Center Hotline at 888-297-8685.
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