Title 1 Home Improvement Loans by The FHA
What are current FHA home improvement loan options for people with no equity? In the current days markets many homeowners found out that there is not enough equity on their home for the FHA HELOC (Home Equity Line of Credit) loans. Their home worth has dropped so deeply that there is not any equity to place as collateral for achieving a home improvement loan.
FHA Home Improvement No Equity Loan Options
The HUD (U.S. Department of Housing and Urban Development) want as many US citizens to be able to be homeowners. But being a home owner of a home which is unsafe or dangerous place to live in, is not really being a homeowner.
For this reason there are some FHA (Federal Housing Administration) loans which are not home-loans. These FHA loan purpose is to help people living in places which needs a constructional renovation and critical home improvements jobs, to be able to borrow the money for these improvements. These loans are for improvements for basic livability or utility of the property.
Like with all the FHA loans, the FHA does not lend the money it self, the FHA just insures the mortgage banks or lenders in case the borrower fails to pay the loan on schedule. The two main FHA home improvement loans are HELOC and Title 1 loans. Since the HELOC loans need equity and many peiople do not have enough equity for such loans, this review will focus on the FHA no equity Title 1 improvement loans.
FHA Title 1 Home Improvement For Single Family
Single family FHA home improvement loans can be granted for alterations, repairs and for site improvements. The basic requirements for the FHA no equity loans are that the borrower will be the home owner, or leasing the property or be the home buyer of the property that needs the renovation. People leasing the property need to prove they will be leasing the property 6 month after the last payment is scheduled.
Some of the common home improvements which are usually approved easily are related to FHA appraisal guidelines and the things a FHA appraisal inspection includes. The main issue is the improvement of the home, not just general paint cover or luxury needs renovation. The FHA will insure borrowers loans only for improvements by two main guidelines: health / safety and structural issues. These can be construction needs, roof, attics, basements, heating/cooling, sewage, adding a room, water installations ect…
Single Family FHA No Equity Loan Guidelines
The maximum amount of money you can borrow with a FHA insured loan depends on the type of property being improved. For a single family home improvement no equity loan the FHA insures up to $25,000. This sum of money can be paid back over 20 years! This sum of money is given with a fixed rate interest and can be paid off without any prepayment fees.
Another great advantage for the Single family FHA title 1 home improvements loan, is that if the sum that is borrowed is less than $7500, than this some is unsecured, it is not requested any mortgage against it, and it is actually like a regular bank loan, but with the 20 year extension, lower than bank loan rates, and no prepayments penalty fees.
FHA Title 1 Loans For Manufactured Houses
There are slightly different guidelines for FHA home improvements loans with no equity (Title I) when it comes to manufactured houses. The manufactured house loans have two main lanes which depend whether the manufactured house is placed on permanent foundation or not.
If the title 1 loan is requested for manufactured home which is not located on permanent foundations (and is private property and not real estate), then the maximum FHA Title 1 loan amount will be $7,500. This amount maximum loan term will be 12 years! The $7500 limit is because manufactured houses without permanent foundations can be gone easily, and this is the maximum amount granted without any security property being mortgaged against the loan.
If the manufactured home is placed on permanent location and property taxes are paid on it, then the $25,000 will be the maximum given, just like a single family home improvement loan. The maximum life span for manufactured permanent houses like these is 15 years.
FHA Home Improvements Loans For Multifamily
For FHA improvement loans for property other than single family, there are slightly different guidelines, but still in the same frame logic. People living in multifamily homes can request and get approved for the Title 1 home loans for up to $12,000 per unit, and $60,000 for the whole building. The money can be used only for building alteration and repairs. By the HUD guidelines the loan can be paid back over 20 years (like single family) and without any prepayments fees.
FHA Title 1 Home loans Regulations
The loan is given by approved lenders for such Title 1 home improvements loans. If you qualify for such a loan and the lender is not on the HUD approved list, than the lender need to recommend another lender which is on the HUD approved lenders list. The interest rate common for such loans is higher than the normal mortgage rate, but may still be lower than the regular bank rate for a conventional loan.
The property being improved must have been completed and occupied for 90 days, these loans are not given for houses under construction.
How To Begin Title 1 Application
The FHA home improvement Title 1 loans are given only to people with nice credit score (not the FHA minimum credit score), people with creditworthiness and the ability to pay the Title 1 loan on time for all the expected payments.
If your credit score is far from perfect or you have some negative items still on the FICO report, you better begin your process by raising your FICO score. Unless you rebuild your credit score, the FHA will have no incentive to approve your application, as the Title 1 loan is risky for the FHA.
Title 1 Home Improvement Process Explained
- So first you must repair your credit score to make it as high as you can.
- Than you need to get approved by the FHA ‘approved lenders list’.
- The third stage will be to find a repair company for the house.
- The company you find should be cleared by the Better Business Bureau or the local Chamber of Commerce, as there have been too many frauds on these loans and HUD recommends to “beware of deceptive home improvement contractors”.
- The money once approved will be passed directly to the borrower or the constructing company.
- The FHA charges the borrower a fee for the cost of insurance.
- Payments need to be paid on time. No penalties for advance loan pay off.
If your credit is less than perfect, take action NOW otherwise you may not be approved for the FHA loan with no equity.
So What Is Your Next Step?
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If your score is below 700, you might want to do something about it – get this ‘Credit Repair University’ which will save you money and time.
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