Presidentially Declared Federal Disaster Areas

Written By: Glenn Michaels, Op-Ed Writer

Periodically somewhere in the United States a natural disaster occurs that impacts an area of the United States. When the President of the United States declares a county of a state a “federal disaster area” then borrowers may qualify for HUD’s 203(h) program.

Many mortgage underwriters and FHA mortgage lenders know very little about the FHA 203(h) program.  Below is an attempt to clarify the 203(h) program.

A borrower first must qualify for the FHA 203(b) program. The 203(b) is the centerpiece of the FHA Single Family Mortgage insurance programs. 

It is intended to provide mortgage insurance for a borrower to purchase or refinance a principal residence. 

The loan is funded by a HUD approved lending institution and the mortgage is insured by HUD. Currently the minimum investment for a 203(b) is 3.50% and the minimum investment for a 203(h) is zero dollars or 100% financing.

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The 203(h0 is for the purchase or rebuilding of a home when:

•    Current home has been destroyed or damaged to such an extent that reconstruction or replacement is necessary.
•    Current home is located in a Presidentially declared disaster area.
•     The home can be rebuilt on the existing property or be anywhere else  in the country.
•    The 203(h) works in conjunction with HUD’s 203(b) program.
•    With the exception of the exception of the 3.50% minimum required investment.
•    Allows for up to 100% financing.
•    May also be used in conjunction with FHA’s 203(k) program.
•    All income, credit qualifying and appraisal requirements of the 203(b( program must be met
•    The property must meet HUD’s Minimum Property Standards and minimum property requirements
•    The home could have been owner occupied or occupied by a renter.
•    Borrower must apply for 203(h) within one year from the date of the Presidentially declared disaster area declaration date.
•    Borrower must have been the owner or a renter of the property.
•    Must have been a permanent resident of the property. Borrower must provide a valid driver’s license, voter registration card, or utility bills to prove residency.
•    Borrower must provide documentation to evidence the destruction or damage to the property that was their permanent residence. These are usually an insurance report, independent fee inspection report, government agency, conclusive photographs.
•    Borrowers have one year to submit their loan application from the date of the President’s declaration.
•    Eligible properties consist of 1 – 4 unit properties, condominiums in a HUD approved condominium project.

The reason I am bring up the 203(h) program is because the state of South Carolina was recently declared a Presidentially Federal Disaster Area and there will be others.

All lenders and underwriters need to know how to handle the properties in a Presidentially Federal Disaster Area.

About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. 

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