As Hurricane Dorian inches closer to the U.S. and increases in size, residents along the coasts of Florida, Georgia, and the Carolinas are bracing themselves for the storm that pummeled the Bahamas. For Florida homeowners, and others along the East Coast, the threat of a hurricane is nothing new. Preparing for a hurricane is one thing, but what do you do after disaster strikes?
A hurricane can leave you without power, water, and can sometimes cause catastrophic damage to your home. While there is a lot to take care of after a natural disaster, you may be wondering what the aftermath looks like for your home and mortgage loan. Let’s talk about how to move forward and what to do immediately after a natural disaster, and ways to start getting back on your feet.
As soon as you can, it’s important to:
Document the damage by making lists, and taking photographs or video. Additionally, keep a log of the date, time, and subject matter of every conversation you have with your insurance agent or company.
A natural disaster may leave you unable to make your monthly mortgage payment. In this case, you could ask your mortgage servicer for a mortgage forbearance, which allows you to stop paying your mortgage for an amount of time that you and your servicer agree upon. There are different versions of forbearance agreements — some allow you to stop paying your total monthly mortgage payment for a period of time , and some allow you make partial payments during your period of forbearance. Most forbearance periods are six months or less. Note: interest still accrues during your forbearance period, but your lender won’t report you to the credit bureaus for not paying or charge you late fees.
Once your forbearance period is over, you and your lender will work out a way for you to make up the payments you missed.
This can be done in a number of ways: paying extra each month, modifying the loan, or reaching another agreement.
When you’re ready to rebuild, there are a few loans, grants, and loan options to help you get back on your feet. The Small Business Administration (SBA) offers loans for families and individuals who qualify who have been affected by a natural disaster. With favorable interest rates, the SBA will grant loans to help repair or replace your primary residence. They offer loans up to $200,000 for renovation and construction costs, and loans up to $40,000 to replace personal property that may have been lost or damaged. Credit, ability to repay the loan, and other factors are taken into consideration when you apply for an SBA loan, so be sure to familiarize yourself with these guidelines when you apply.
FEMA can offer housing assistance to individuals who lose their homes in a presidentially-declared disaster area, that could help in the time between your SBA loan and your insurance payout if you qualify. Grants can be used for everything from basic home repairs not covered by your insurance policy to rent for temporary housing and medical care as a result of the natural disaster.
Additionally, there are renovation loan programs available. The Federal Housing Administration (FHA) has programs specifically tailored to victims of natural disasters. These programs make it possible for homeowners to rebuild their home or buy a replacement home after a disaster hits.
An FHA 203(k) loan may be a good option to assist you with rebuilding your home if you want to stay in an area after a natural disaster.
A 203(k) loan allows you to factor the cost of repairs and remodeling into your home loan, while limiting the amount of out-of-pocket renovation costs. A 203(k) limited loan is for minor cosmetic repairs up to $35,000, while a 203(k) standard loan is for more complex repairs totaling more than $35,000. There are different guidelines and requirements for each type of 203(k) loan, so it’s a good idea to talk to a mortgage banker about your options.
Another option, the 203(h) loan provides more relaxed guidelines and requirements to borrowers in presidentially-declared disaster areas whose homes (rented or owned) were destroyed or severely damaged. An FHA 203(h) loan can be combined with an FHA 203(k) loan. If your home has recently been affected by a natural disaster, talk to a mortgage professional about your options when you’re ready to rebuild.
When a natural disaster hits your home, it can be devastating, but you have options. Make sure you take care of immediate safety needs first, then be sure to contact the necessary agencies and companies. When you’re ready, you can start to look into your options to rebuild and renovate.