Mortgage Insurance for Disaster Victims Section 203 (h)

Written By: Glenn Michaels, Op-Ed Writer

Recently where I reside, Oceanside, NY, was impacted by Hurricane Sandy. Many homes and businesses were damaged by the winds and more by the surge brought on by the hurricane.

The President of the United States toured the area and declared the area a “Presidentially Declared Federal Disaster Area” which now makes it easier to obtain mortgages, become homeowners or to re – establish themselves as homeowners under the FHA 203 (h) program.

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This program provides mortgage insurance to protect lenders against the risk of default on mortgages to qualified disaster victims. Individuals are eligible for this program if their homes are located in an area that designated by the President as a disaster area and if their homes were 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. This program is similar to the basic Section 203 (b) program for one to four family homes but offers some features that makes recovery from a disaster easier for home owners.
• No down payment is required. 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. Mortgagees collect from the borrowers an upfront insurance premium (which may be financed) at the time of purchase, as well as monthly premiums that are not financed, but instead are assed to the regular mortgage payment.

• HUD sets limits on the amount that may be insured. To make sure that its programs serve low and moderate income people, FHA sets limits on the dollar value of the mortgage. The current FHA mortgage limit can be viewed on line. 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).

Eligible Participants:
FHA approved lending institutions, such as banks, mortgage companies, and savings and loan associations, are eligible for Section 203 (h) insurance.

Need FHA Training? CLICK HERE:

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 program.

The borrower’s application for mortgage insurance must be submitted to the lender within one year of the President’s declaration of the disaster. Applications are made through any approved FHA lender and can be underwritten through Direct Endorsement.

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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