FHA Title 1 Loans – What they Are and How they Work

FHA title 1 loans

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.

Rate Search: Check Current Mortgage and Refinance Rates

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

Large Repairs

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.

Room Additions

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.

Get Approved for a Home Loan Today

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

Alternative Loans

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

A home equity loan uses home equity as collateral for a second mortgage on a home. You must have at least 30% equity, can qualify for loans up to 80% of the loan-to-value ratio.

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.

Cash-out Refinance

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.


Shop and Compare Home Mortgage Rates and Loan Offers