How To Buy A Home With FHA

Hurricane Harvey has left many Houstonians without a safe place to live, whether they were renting or owned a home. Fortunately, FHA loans are available to help get people into new homes as quickly as possible without having to make a large down payment.

For people hit hard by Harvey, this is great news!


What is an FHA loan?

An FHA (Federal Housing Administration) loan allows buyers to finance the entire value of the home, making home ownership accessible for those without the cash flow required for a more typical mortgage configuration.

According to Mike McFarland of Legacy Mutual Mortgage, “The FHA Home Loan is a great solution for people who lost their homes during the flooding from Hurricane Harvey. It provides a loan to buy a home with no money down, and is good for a year. This is particularly great for people who were renting and haven’t been able to save up to buy—Now they don’t have to put a large sum of cash down at the closing table, and are still in a position to find a home for their family.”

“And since it’s good for a year,” Mike explains, “those who have signed short-term leases will still be able to move into their very own home once their three-month or six-month lease is up.”

While FHA loans are typically only available to lower income buyers, the Department of Housing and Urban Development created the 203(h) program to allow FHA to insure mortgages for victims of major disasters as defined by FEMA if they lived in a Presidentially Declared Major Disaster Area, or PDMDA. If the borrower was living in a residence that was destroyed or unlivable and was located in the PDMDA, they qualify to purchase a new home in move-in-ready condition as part of the FHA program.

In addition to waiving standard down payment requirements, FHA loans are also unique in that an existing mortgage doesn’t count against the buyer.

Mike says, “This loan is also great for homeowners who lost their home in the flood. If they want to move into a new home, the FHA Home Loan will not count their current mortgage against them—it acts as if the mortgage doesn’t exist.”

“This is huge for homebuyers, letting many qualify for loans they never would have with a mortgage in place. Now they can start the process of buying their new home while their original home remodels and sells.”

Qualifying for a FHA loan

In order to qualify for the FHA loan program, buyers must meet a few specifications. The home purchased must be the buyer’s primary residence. The FHA mortgage must be fixed rate, and is available to those with a FICO store of 640 or higher.

Prospective buyers must supply proof that their previous residence was destroyed, and must apply for the loan within one year of the declared disaster, which gives buyers time to find a home they like and let their lease end if they were renting and still have time left on their contract. The minimum loan amount is $50,000, and no down payment is required. Borrowers can finance up to 100% of the property value.

The borrower is not restricted to purchasing a property in or near the disaster area, so if you lost your home and have been thinking of moving anyway, FHA gives that freedom.

Because FHA loans can be a little bit more difficult to arrange, it’s important to coordinate with a realtor who knows the in-and-outs of the program and is prepared to guide you through the process.

Fortunately, Mike McFarland led a class on FHA loans for all of the Realtors® at Circa Real Estate, so you know your local agents are ready and waiting to help you process yours.

Legacy Mutual Mortgage stays ahead of the curve when it comes to deals like this,” said McFarland. “We know the ins and outs of mortgage loans, and can help people in almost any situation in the wake of Hurricane Harvey. Any offer like this that we can leverage to help get people qualified for loans is top priority for us, and we want to be sure people are taking advantage of it.”

If you lost your home to Hurricane Harvey and need to find a new one as soon as possible, contact us today to get the ball rolling on your FHA loan and to start the search for the perfect property. While nothing about losing your home to a natural disaster is easy, we’re here to help make things as easy and painless as possible and get your life back to normal.