Unlike some of the other government-backed loans, FHA Title 1 loans were designed purely to help existing homeowners pay for renovations and don’t offer funds for buying or refinancing homes.
What Is A FHA* Title 1 Loan?
FHA Title 1 loans were designed to provide money to homeowners to finance permanent home improvements that either improve the home’s safety, livability, or functionality. The loan can be used for everything from repairing damaged foundations to adding bedrooms. However, they cannot be used for luxury improvements, such as adding a swimming pool.
No equity is required to be eligible for an FHA* Title 1 loan, making it a good option for homeowners whose property has lost value since its purchase. Low or even negative equity have no impact on whether the borrower can qualify or not.
Maximum Loan Amounts
The maximum a homeowner can obtain for their single-family home improvement through an FHA Title 1 loan is $25,000. Any loan over $7,500 requires the borrower to put up collateral. Loans below $7,500 are unsecured. For multi-family buildings, owners can borrow an average of $12,000 per living unit at a maximum of $60,000.
Other Important Factors
FHA* Title 1 loans are available at loan terms of a maximum of 20 years, although shorter terms are available. There are also no prepayment penalties, which means the homeowner can pay the loan off early.