If you explore FHA home loan options, you’ll find a variety of them–there are loans for new purchase mortgages, but also options for energy efficient mortgages, home equity conversion loans, rehab loans, and something called the FHA Title I Home Improvement loan.
Title I loans are used for repair, alteration, or site improvements and can be used together with a 203k Rehabilitation Mortgage if needed.
Title I loans for a single family home can be approved for amounts up to $25,000 for qualified borrowers. Applicants aren’t required to ask for the maximum amount; according to the FHA official site, “Both large and small improvements can be financed.”
FHA rules also state, “Any loan over $7,500 must be secured by a mortgage or deed of trust on the property.” As with other FHA home loans, borrowers must submit application data and qualify with a credit check, lender verification of application data and other typical FHA loan requirements.
Unlike FHA mortgages, which come in 15 or 30 year loan terms, the maximum loan term for this type of FHA home improvement loan is 20 years for a single family home. The loan is offered with fixed interest rates based on the “common market rate” in the area where the loan is issued.
Variable rate loans are not available for Title I Home Improvement loans. As with other FHA home loans, there is no pre-payment penalty; borrowers can overpay on these loans without being required to pay fees or penalties.
One specific requirement of the FHA Title I Home Improvement loan is a minimum age clause, which states that any property improved with Title I loan funds must be complete and occupied for at least 90 days.