If you are interested in remodeling your home and your funds and equity are limited, you may be looking towards an FHA Title 1 loan. These loans are insured by the FHA against loss and authorized by Title 1 of the National Housing Act.
The FHA Title 1 loan is a versatile loan, meaning it can be used for various things. You can use it to make your home more livable and useful, to purchase home appliances, for remodeling, or for building additions on an existing structure. However the loans are limited in the sense they cannot be used to pay for work that is already done or for luxury items, such as a pool or outdoor fireplaces.
Improvements paid for by FHA Title 1 can be done on your own, or by a contractor, dealer or architect. There are advantages to using this type of loan that consist of, but are not limited to:
· Loans under $7,500 often need no security other than your signature.
· Your living location is not a defining factor.
· Your loan can cover fees including engineering fee, permits, title examination, inspections, and appraisal fees.
· To receive the loan you only need to fill out the application, show you are a good credit risk, have a long term lease to the property and sign a promissory note stating you agree to pay back the money.
· You need not use the deed trust or mortgage to receive the loan.
· You receive protection from the wrong kind of contractor or dealer. FHA requires any dealer arranging for this loan to be first approved by the lender.
These loan interest rates are not set by HUD/FHA, they are negotiated by the lender and borrower. There are limits to the amount of loan you can receive through FHA, which is $25,000, with a repay limit of 20 years. The limit on loans for property improvement to a manufactured home is $17,500, with a repay limit of 15 years. The maximum amount for a property improvement loan with alteration, repair, or improvement to an existing Manufactured (Mobile) Home that is classified as Personal Property is $7,500, with a maximum repay term of 12 years. Other loan restrictions include loans for multifamily structures. These are limited to $60, 000 for 2 or more family dwellings, not to exceed $12,000 per family unit.