Disaster Assistance Loans for Homes & Personal Property

SBA
U.S. Small Business Administration
America's Small Business Resource

The Facts About...
Disaster Assistance Loans for Homes & Personal Property

If you are in a declared disaster area and are the victim of a 
disaster, you may be eligible for financial assistance from the
U.S. Small Business Administration - even if you don't own a 
business.  As a homeowner, renter and/or personal-property
owner, you may apply to the SBA for a loan to help you
recover from a disaster.

This brochure describes the type of assistance available and
answers the most frequently asked questions about the SBA's
disaster-assistance program for individuals.  Where practical,
assistance with completing the application will
be available.

Assistance Available

As an individual, there is one basic loan, with two
purposes, available to you:

Personal Property Loan: This loan can provide a homeowner
or renter with up to $40,000 to help repair or replace
personal property, such as clothing, furniture,
automobiles, etc., lost in the disaster. As a rule of thumb,
personal property is anything that is not considered real
estate or a part of the actual structure. This loan may not
be used to replace extraordinarily expensive or irreplaceable
items, such as antiques, collections, pleasure boats,
recreational vehicles, fur coats, etc.

Real Property Loan: A homeowner may apply for a loan of up
to $200,000 to repair or restore their primary home to
its pre-disaster condition. The loan may not be used to
upgrade the home or make additions to it. If, however, city
or county building codes require structural improvements,
the loan may be used to meet these requirements. Loans
may be increased by as much as 20 percent to protect the
damaged real property from possible future disasters of the
same kind.

Note:  A renter may apply only for a personal property loan.

Insurance Proceeds: If you have insurance coverage on
your personal property/home, the amount you will receive
from the insurance company will be deducted from the
total damage to your property in order to determine the
amount for which you are eligible to apply to the SBA.

If you are required to apply insurance proceeds against
an outstanding mortgage, the amount applied can be included
in your disaster loan. If, however, you voluntarily apply
insurance proceeds against an outstanding mortgage, the
amount applied cannot be included in your disaster loan.

If you have not made a settlement or are having trouble
reaching an agreement with your insurance company, you
may apply for a loan in the full amount of your damages
and assign any insurance proceeds to be received to the
SBA.

Interest Rates on Loans: The law requires a test of your
ability to obtain funds elsewhere in order to determine
the rate of interest that will be charged on your loan.
This credit-elsewhere test also applies to applicants
for both personal property and real property loans.

Applicants Who Can Obtain Credit Elsewhere:
The interest rate to be charged is based on the cost of
money to the U.S. government, but will not be more than
8 percent per year.

Applicants Determined Unable to Obtain Credit Elsewhere:
The interest rate to be charged will be half of the interest
rate charged to applicants determined to be able to obtain
credit elsewhere, but will not be more than 4 percent per
year.

Term of Loan: The maximum maturity, or repayment term of
an SBA loan, is set at 30 years. However, the SBA will
determine repayment terms on a case-by-case basis according
to your ability to repay.


Frequently Asked Questions About SBA Loans

Q. How much can I borrow?

A. The amount of money that the SBA will lend you will
be based upon the actual cost of repairing or replacing
your home and/or personal property, minus any insurance
settlements or other reimbursements or grants. The total
loan amount is subject to the limits set out above.

Q. Must I use my own money or try to borrow from a bank
before coming to the SBA?

A. No.

Q. I already have a mortgage on my home. I can't afford
a disaster loan plus my current mortgage payment. Can the
SBA refinance my mortgage?

A. In certain cases, yes. The SBA can refinance all or part 
of prior mortgages, evidenced by a recorded lien, when the 
applicant: 1) does not have credit available elsewhere; 
2) has suffered substantial uncompensated disaster damage 
(40 percent or more of the value of the property); and 3) 
intends to repair the damage. An SBA disaster loan officer 
can provide more detailed information on your specific situation.

Q. What information do I need to submit for a home and/or
personal property loan?

A. The necessary information is specified in the loan
application. In all cases, it includes an itemized list
of personal property losses with the repair or replacement
cost of each item. It also includes permission for the
IRS to give the SBA information from your last two federal
income tax returns. If you have pictures of the
damaged property, you can include them as well.

Q. Will the SBA check the losses I claim?

A. Yes. Once you have returned your loan application, an
SBA loss verifier will visit you to determine the extent
of the damage and the reasonableness of the loan request.

Q. How soon will I know if I qualify for a loan?

A. That depends on how soon you file a complete SBA loan
application. The SBA disaster relief program is not an
immediate emergency relief program such as Red Cross
assistance, temporary housing assistance, etc. It is a
loan program to help you in your long-term rebuilding
and repairing. To make a loan, we have to know the
cost of repairing the damage, be satisfied that you can
repay the loan, and take reasonable safeguards to help
make sure the loan is repaid. The SBA loan application
asks for the information we need. The faster you return 
it with all the needed information, the faster we can 
work on it. We try to make a decision on each complete 
application within seven to 21 days. Applications filed 
early can be completed in a much shorter time.  We 
process applications in the order received, so file 
early. Be sure your application is complete; missing 
information is the biggest cause of delay.

Q. How soon can I expect the money?

A. Loans over $10,000 have to be secured. We won't
decline a loan just because you do not have enough
collateral, but we do ask for whatever collateral is
available. This means that after a loan is approved
there are other steps you must take. Usually, the
security consists of a first or second mortgage on the
damaged real estate. After we approve the loan, we
will tell you what documents are needed to close the
loan.  You return the loan-closing documents to us, we
can order the checks. You will receive the money in
installments as you need it to repair or replace the
damage.

Q. Should I wait for my insurance settlement before I
apply to the SBA?

A. No. If you do not know how much of your loss will be
covered by insurance or other sources, the SBA will con-
sider making a loan for the full amount of the loss, up
to our loan limits, provided that you assign the insurance
check to the SBA to reduce the amount of the loan.

Q. I would like to get a contractor's estimate for the
cost of repairing damage to my home, but I'm having
trouble finding one. Should I hold up my application
until I get the estimate?

A. No. You might miss the deadline for filing your appli-
cation while waiting for a contractor's estimate. If you
have an estimate, include it. The SBA will verify any
damage estimates listed on your loan application. Also,
the sooner you file a completed application, the sooner
the SBA can process it.

Q. If I receive a disaster loan, may I spend the money
any way I want?

A. No. The disaster loan is intended to help you return
your property to the same condition it was in before the
disaster. Your loan will be made for specific and
designated purposes. Remember that the penalty for
misusing disaster funds is immediate repayment of one-and-
a-half times the original amount of the loan. The SBA
requires that you obtain receipts and maintain good
records of all loan expenditures as you restore your
damaged property and that you keep these receipts and
records for three years.

Q. If my home is completely destroyed, can the SBA lend me
money to relocate my home somewhere else?

A. If you are unable to obtain a building permit to
rebuild or replace your home at its original site, the
cost of relocating your home might be included in the
loan amount. If, however, you decide to relocate your home
without being required to, an SBA loan can be obtained
only for the exact amount of the damage. SBA can not make
loans involving some relocations.  An SBA disaster loan
officer can provide more detailed information on
your specific situation.

Q. I am a farmer. My home was damaged, and so were my
barns, fences, and some of my crops. Am I eligible to
apply for SBA assistance?

A. You may apply to the SBA for a loan to cover the damage
to your home and its contents only. But it may be in your
interest to seek assistance first from the U.S. Department of
Agriculture for all your damage.

Q. Are secondary homes or vacation homes eligible for
loans?

A. No, not as homes. They may be eligible for business
disaster loans under certain conditions.

Q. Are there any other limitations?

A. Yes. Generally, loans will not be made for damage to
personal pleasure boats, planes, recreational vehicles,
antiques, collections, etc. Also, amounts for landscaping,
family swimming pools, etc., are limited.

Q. Is there a minimum monthly payment, and when would the
first payment be due?

A. The SBA does not have a minimum monthly payment. Payments 
vary depending upon income and expenses, size of family and 
other circumstances that may affect your repayment ability. 
Generally, the first payment is not due until five months 
after the date of the loan.

Q. I had to remove debris from my property after the
disaster. Can this expense be included in my loan
application?

A. Yes, but your own labor and that of family members
cannot be included. Amounts paid to others and any
equipment rental can be listed as part of repairs to real
estate. Remember that the maximum loan limit on real
estate damage is $200,000, and debris removal is
included in the limit.

Q. May people over the age of 65 apply for help from the SBA?

A. Yes. Loans are made without regard to age.

Q. I've heard that SBA loan applications are complicated
and hard to complete. Is this true?

A. No. The application form asks you the same information
that any bank would request before lending you money. If
you need help, SBA disaster personnel are available to ex-
plain the forms and give you assistance at no charge. You
may use the services of accountants or attorneys if you
wish, but be sure they are reliable and that their fees
are reasonable. If you choose to use an attorney or an 
accountant, you must report those fees on your SBA loan 
application form.

Q. Are damages to cars and mobile homes eligible?

A. Generally, yes. The loan would be only for uninsured
losses.

Q. Do I need flood insurance to get a loan?

A. If you are in a special flood hazard area, you must
have flood insurance before we can disburse a loan. The
amount of insurance required is the insurable value of
the property in the special flood hazard area but not to
exceed the maximum flood insurance available under the
National Flood Insurance Act.


For More Information

The SBA delivers loans through four disaster area offices
located in Niagara Falls, N.Y.; Atlanta, Ga.; Fort Worth,
Texas; and Sacramento, Calif.  When a disaster occurs, infor-
mation on SBA assistance is available through a toll-free
number published locally.

SBA offices are located in all 50 states, the District of Columbia, 
Puerto Rico, the U.S. Virgin Islands and Guam.  For the office 
nearest you, look under "U.S. Government" in your telephone 
directory, or contact: 

	*Phone: 1-800 U ASK SBA
	*Fax: 202-481-6190
	*E-mail: answerdesk@sba.gov
	*TDD: 704-344-6640
	*Your rights to regulatory fairness: 1-888-REG-FAIR
	*Internet:
		SBA Home page: http://www.sba.gov
		Gopher:http://www.sba.gov/gopher

All of the SBA's programs and services are provided to the public
on a nondiscriminatory basis.

SBA No. DA-1 (02/01)
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