This guide covers FHA Title I Loans. FHA Title I loans, or Title I Loans, and Title I Property Improvement Loans, are a type of home improvement loan offered by the Federal Housing Administration (FHA), a division of the U.S. Department of Housing and Urban Development (HUD).  FHA Title I Loans are designed to help homeowners repair their properties.

Homeowners can use Title I loans to make necessary minor improvements and light home renovations that impact the security, safety, and habitability of their homes.

FHA Title I Loans are limited to a maximum cap and are meant to be used for minor improvements. Title I Property Improvement Loans are not meant for major renovations. Homeowners don’t need substantial home equity to get Title I Property Improvement Loans for repairs and improvements. The following paragraphs will discuss everything you need about Title I Property Improvement Loans and how it works.

What Are Title I Property Improvement Loans 

Homebuyers can qualify and get approved for FHA Title I Loans at select HUD-approved lenders. Not all mortgage lenders offer Title I Property Improvement Loans. FHA Title I Loans come in the form of secured or unsecured home improvement loans insured by HUD, the parent of FHA. 

FHA Title I loans are unsecured, unlike traditional home equity loans or mortgages. This means they are not backed by the property but by the borrower’s creditworthiness and ability to repay the loan.

The loan is a fixed-rate home renovation loan for homeowners. FHA Title I Loans come only in fixed rate terms. Adjustable-rate FHA Title I Loans do not exit.  Unsecured Title I Loans are capped at $7,500 and require the homebuyer’s guarantee by signing a note. FHA Title I Loans of higher than $7,500 require the borrower’s home as collateral and will be placed in second position. 

FHA Title I Loans are used for smaller home renovation projects to help home buyers purchase a house. The home loan program benefits homebuyers, especially first-time buyers with limited budgets, with a home renovation or repair budget when purchasing a house where otherwise they would not have been able to afford it. Since Title I Loans have a loan limit, homebuyers can purchase them with a traditional first mortgage and piggyback a Title I loan to make home improvements.

What Are Title I Property Improvement Loans Used For?

One of the top projects for Title I Property Improvement Loans is the installation of solar panels.  Installation of solar panels can cost thousands of dollars. Most homebuyers need financing when buying a house. The return on investment far outweighs the cost of purchasing a solar panel for your home.

Solar panels are normally amortized over five to fifteen years. The savings from the monthly payment of the solar panel installation far exceed the cost of the installation and lease of the solar panel.

Mortgage rates for solar panel financing vary depending on the market rates on consumer loans. Besides the installation and the solar panel lease for your home, there are other uses for Title I Property Improvement Loans.  Other uses of Title I Property Improvement Loans are painting, repairing, or installing a new roof, installing the mechanicals, and repairing or replacing the roof, fascia, soffits, and gutters.

How Do Title Property Improvement Loans Work?

Title I loans are for smaller construction projects, such as installing solar panels and HVAC systems, not major home improvements.  You cannot use FHA Title I Loans for unnecessary luxury items such as outdoor kitchens or indoor or outdoor in-ground pools.

Property owners use FHA Title I loans for making renovations and repairs such as the lease and installation of solar panels and other repairs such as HVAC, plumbing,

Title I loans are intended for a range of home improvement projects, such as fixing a leaky roof, installing a new HVAC system, making accessibility improvements for disabled individuals, or upgrading electrical or plumbing systems. They are not meant for luxury renovations or additions.

FHA Title I Loans Eligibility Requirements

To qualify for a Title I Property Improvement loan, you typically need a reasonable ability to repay the loan and meet certain creditworthiness requirements. These loans are available to single-family homeowners and owners of multi-family properties (up to four units).

Loan Limits on FHA Title I Loans

Title I property improvement loans have maximum loan limits that vary based on the type of property and the nature of the improvements. A single-family home’s maximum FHA Title I loan limit is $25,000. The maximum loan limit on Title I Loans on two-to-four-unit multi-family homes is capped at $12,000 per unit. The maximum loan limit on Title I Property Improvement Loans on multi-unit homes is $60,000.

Loan Terms of Title I Property Improvement Loans

Title I loans have fixed interest rates and terms that typically range from 12 to 20 years, depending on the loan amount and property type. The interest rates may be higher than those of traditional home equity loans or mortgage loans due to the unsecured nature of these loans. You must work with an FHA-approved lender to apply for a Title I loan. The lender will evaluate your credit and financial situation to determine your eligibility and the loan terms.

FHA Title I Loans Use of Funds

Funds from Title I loans must be used solely for the approved home improvement projects. Borrowers are typically required to provide detailed project plans and cost estimates. Solar panel financing is among the most popular for Title I Loans. There are also alternative types of financing to Title I Loans:

It’s important to note that Title I property improvement loan programs and terms may change over time. It is recommended to check with HUD or an FHA-approved lender for the most up-to-date information on FHA Title I loans.

If you are considering applying for Title I Property Improvement Loans and have difficulty finding a lender, please contact us at Gustan Cho Associates at 262-627-1965. Text us for a faster response. You can email us at gcho@gustancho.com. The team at Gustan Cho Associates are experts in FHA Title I Loans and solar panel financing. HUD updates its loan program often throughout the year, and there may have been changes or updates since then.