FHA Title 1 Home Improvement Loans: Explore the Options

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Most homeowners use home equity loans when it comes time to renovate, but this isn’t always possible. Homeowners with underwater mortgages (they owe more than their houses are worth) or manufactured homes aren’t eligible for regular home equity loans.

But that doesn’t mean you have to live with a run-down house. You may not have equity, but you are probably still eligible for an FHA Title 1 Home Improvement Loan.

What Are FHA Title 1 Home Improvement Loans?

FHA Title 1 loans are loans from the HUD (Department of Housing and Early Development) of up to $25,000 that can be used for home improvement projects. These loans are insured by the federal government, so if you default, they pay your loan. This makes Title 1 loans accessible to people who aren’t able to access other types of funding.

Interest rates for Title 1 loans aren’t subsidized. Your rate will be based on typical market rates in the area.

Who Is Eligible for an FHA Title 1 Loan?

Borrowers need to fit one of the following criteria:

  • They currently own the home to be renovated
  • They are leasing the property to be renovated
  • They are in the process of purchasing the property under a land installment contract.

Title 1 loans can be used for most home improvement projects, but there are some restrictions. Your lender should be able to help you figure out whether or not your renovations qualify.

Where Can You Get an FHA Title 1 Loan?

Only HUD-approved lenders can provide FHA Title 1 loans. The HUD website allows you to search for local approved lenders.

How Do You Get FHA Title 1 Home Improvement Loans?

The FHA Title 1 application process is quite similar to applying for a mortgage. You’ll need to prove that you have decent credit and enough income to pay off the loan. You may be asked for recent pay stubs, bank statements, income tax returns, and W2 statements.

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