If you’re looking at making improvements or repairs to your home, a Federal Housing Administration (FHA) Title 1 loan could be a great option for you. Title 1 loans are the federal government’s way of helping homeowners who don’t otherwise qualify for a traditional home equity loan to finance their home improvements. The loans are backed by the FHA but are issued through approved private lenders such as American Federal.
Title 1 loans can be used to fix up single-family homes, as well as manufactured homes, multifamily properties and nonresidential buildings. Borrowers can also use the proceeds for site improvements and historic preservation. Basically, the improvements from a Title 1 loan must “protect or improve the basic livability of the property.”
Loans of less than $7,500 typically are unsecured, though loans above that amount will use your property as collateral. You can make the improvements yourself or use contractors.
The following types of projects are allowed:
- New flooring
- New roof
- Replacing home systems (HVAC, plumbing, etc.)
- New appliances
- Adding accessibility for someone with a disability
- Energy-efficiency improvements
Title 1 loans are not allowed to be used for cosmetic for luxury improvements, such as swimming pools elaborate landscaping, or for cosmetic upgrades.
Because Title 1 loans are backed by the FHA, credit requirements may be more forgiving than other types of loans. Likewise, equity requirements are not as stringent, which makes them a good choice for people who have recently purchased the property they want to improve. Also, with the added equity from the completed improvements you may also be able to refinance into long term financing, saving your even more in the long term and simplifying your monthly payments.
If you’re interested in learning more about FHA Title 1 loans, or any other mortgage products, contact your American Federal Banker.