Many FHA borrowers are interested in home improvement loans or rehab loans. In addition to the FHA 203(k) Rehabilitation Loan program, the FHA and HUD offer something called the Title I loan.
According to FHA.gov, “The Title I program insures loans to finance the light or moderate rehabilitation of properties, as well as the construction of nonresidential buildings on the property.
This program may be used to insure such loans for up to 20 years on either single- or multifamily properties. The maximum loan amount is $25,000 for improving a single-family home or for improving or building a nonresidential structure.”
For multi-family unit, there is also an FHA Title I loan, with a maximum of $12,000 per family unit, “not to exceed a total of $60,000 for the structure.”
FHA Title I loans are fixed-rate loans, with interest rates set at typical market rates. The interest rates are not subsidized by the Department of Housing and Urban Development, but the FHA official site says, “some communities participate in local housing rehabilitation programs that provide reduced-rate property improvement loans through Title I lenders.”
Like other FHA home loans, only FHA/HUD approved lenders can offer a Title I loan. Borrowers must be eligible for the Title I program which means you must be either “the owner of the property to be improved, the person leasing the property (provided that the lease will extend at least 6 months beyond the date when the loan must be repaid), or someone purchasing the property under a land installment contract”.
The FHA has a list of “eligible activities” for Title I loans, which include financing “permanent property improvements,” as well as any renovations that “improve the basic livability or utility of the property–including manufactured homes, single-family and multifamily homes, nonresidential structures, and the preservation of historic homes.” The FHA also permits Title I loans to be used for fire safety equipment.