Making improvements to your home are a good investment as they can increase the market value.
You have a few home improvement options, but there’s one that most people haven’t heard of.
FHA title-1 loans can give you up to $60,000 to make repairs and give you 20 years to repay the loan.
But what are title-1 loans and how do they work? Let’s take a deeper look.
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What is an FHA Title 1 Loan?
If you have home repairs or renovations that will increase the value of your home, an FHA title-1 loan provides you financing.
Like how an FHA loan works, the Government does not issue the loan, they provide insurance in the event a borrower defaults the FHA pays the lender the balance and takes possession of the home.
This is a type of home improvement loan that provides up to $25,000 to homeowners to makes upgrades to their home.
Types of Improvements Allowed with Title 1 Loans
If your house is in need of any large repairs, such as plumbing, a new roof, or foundation issues. It’s best to get it fixed as soon as possible to avoid further damage and problems in the future.
Energy Efficient Upgrades
Going green is safe for the environment and can ultimately save homeowners money in the long run. However, in the short run they are expensive, energy efficient improvements can be quite costly.
Financing these improvements is ultimately worth it because your energy bills will be reduced and you will eventually hit the break-even point and they become cost effective.
Adding extra room or bathroom will also help increase the fair market value of your home. They also add additional square footage making the home more valuable and marketable.
If your home is out-dated you’re probably ready to modernize it by installing wood floors, new title or carpet. These renovations not only improve the value of a home, they make it easier to live in.
FHA Title 1 Highlights
Maximum Loan Limit – $25,000 for single-family dwelling, $12,000 per unit up to $60,000 for multi-family units.
Home Equity not required – Unlike a home equity loan an FHA title 1 loan does not require equity. However, loans above $7,500 must be secured by the home.
Long-term loan – The loan term can be stretched over as many as 20 years
FHA Energy Efficient Mortgage (EEM)
FHA loans are very popular because of their low down payment and credit score requirements. If you want to purchase a home and make energy efficient improvements the FHA Energy Efficient Mortgage Program loans you additional money to pay for them.
The loan amount can exceed the purchase price of the home. But, the borrower only needs to qualify for the amount of the purchase, not the additional funds.
FHA 203k Loans
203k home loans are a type of home improvement loan that finances up to $35,000 of repairs or renovations. They require a low down payment of just 3.5% and come with many benefits.
With a streamline 203k loan the process is streamlined requiring less documentation. You will need a 640 credit score to qualify.
Financing Home Improvements by Refinancing
Home Equity Loans and Lines of Credit HELOC
The money you receive from a home equity loan does not need to be used on home upgrades or repairs. Borrowers are able to use the funds for debt consolidation or large purchases. Loan terms are usually between 5-10 years.
A cash-out refinance is similar to a home equity loan in that you can cash in on your equity. However, with a cash-out you are refinancing your current mortgage and adding up to 80% of the LTV ratio with one loan.
The Lenders Network has the largest network of mortgage lenders that specialize in home loans for borrowers with all types of credit scores. We will match you will the best lender based on your specific situation.