How to Navigate SBA Disaster Loans for Homeowners and Renters

sba Sep 09, 2021

The SBA offers loans to homeowners and renters to help them repair and rebuild from a natural disaster. Many areas of the county are being affected by natural disasters right now. Here is everything you need to know about the SBA Home and Personal Property Loan should you ever need it.

What Are SBA Disaster Loans?

The Small Business Administration (SBA) offers low-interest capital to businesses, non-profits, homeowners, and renters to help them recover from a federally declared disaster. Likely, the most well-known disaster loan right now is the Economic Injury Disaster Loan (EIDL) program.

EIDL is a type of disaster loan, but it is specific to the Covid-19 pandemic and is expiring in December 2021. The SBA offers the Home and Personal Property Loan (which is another type of disaster loan) on a continual basis.

How Do You Qualify For an SBA Disaster Loan?

To qualify for a disaster loan, you must live in a declared disaster area and have physical damage to your home or property. This is the biggest factor because the purpose of the loan is to help people rebuild and recover from a natural disaster.

The SBA has a list of all declared disasters in the U.S. You can use their search function to narrow down the list by state and county to find if your county falls in a disaster area. You already know if your county experienced a disaster, but it must be listed on their site.

It is important to note that the Home and Personal Property Loan Does not apply to secondary homes or vacation homes. In other words, it only applies to your primary residence. If you own a rental property that is damaged, it may qualify under the Business Physical Disaster Loan.

What Can You Use The Disaster Loan For?

If you own a home, you can apply for up to $200,000 to replace or repair your primary residence. Generally, the loan can't be used to upgrade or make additions to your home, unless it is deemed necessary by your local government's building codes.

If you make improvements that prevent future property damage, the SBA allows an additional 20% on top of the $200K. In some cases, you may be able to refinance all or part of a previous mortgage with the SBA.

Renters can apply for up to $40,000 to replace or repair their personal property. Personal property includes cars, clothing, furniture, appliances, etc. Homeowners can apply for the $40,000 personal property loan in addition to the $200K for their home.

What are the The Home and Personal Property Loan Terms?

When you apply, the SBA will determine if you are eligible for credit from other lenders. The SBA does not list a minimum credit score for this program. If you are not eligible for credit from other lenders, the interest rate for your loan will be 4% or less. If you are eligible for credit from other lenders, the rate can be up to 8%.

No matter the interest rate, the SBA offers their loans with terms of up to 30 years. This makes the repayment much more manageable than a loan with a short repayment term.

It is important to note that your total loan amount will decrease by the amount your insurance covers. For example, if you are approved for $200K from the SBA but your homeowner's insurance covers $150,000, the SBA will only loan you $50,000.

How Do You Apply For The Home and Personal Property Loan?

Applying for a Home and Personal Property Loan is straightforward. Visit the SBA's website and fill out an online application. You will need IRS Form 4506-C so the IRS can send the SBA your tax information. The SBA will then send an inspector to estimate the cost of the damage to your home before finalizing your loan.

If you have other questions, you can visit their FAQ page, email the SBA at disastercustomerservice@sba.gov, or call them at 1-800-659-2955.

Conclusion

If you have experienced a disaster and need to repair your home or replace personal property, the SBA Home and Personal Property Loan is an option you may consider. With lower interest rates and up to 30-year terms, the repayment may be easier to manage than loans for other institutions.

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