The FHA Title 1 Loan is different than the standard FHA loan most people think about. The Title 1 loan is a home improvement loan that you can use once you own a home or even on top of your standard FHA purchase loan. The Title 1 loan was created for low to moderate-income families that don’t qualify for a standard home improvement loan.
Keep reading to learn about the FHA Title 1 Program and how it works.
The FHA Title 1 Loan Program is a home improvement loan for home improvements and repairs. You can borrow up to $25,000 for a single-family home. If you have a multi-unit home or a manufactured home, you can borrow as follows:
$12,000 for each unit in a multi-unit property up to $60,000
$25,090 for a manufactured home on a foundation
$7,500 for a manufactured home not on a foundation
You can borrow funds for a single-family home or multi-unit for 20 years. If you borrow the funds for a manufactured home, you can have a maximum term of 15 years if it’s on a foundation and 12 years if it’s not on a foundation.
Qualifying for the FHA Title 1 Loan
Just like the standard FHA loan, the qualification guidelines are rather flexible for the Title 1 loan. Basically, the FHA allows you to use the funds for any improvements that make the home more livable. The definition of ‘more livable is pretty much up to your own discretion, though. The FHA does make sure that you use the funds as intended once they are disbursed though.
The guidelines are as follows:
You don’t have to have a minimum credit score. The lender will pull your credit to make sure you are current on your debts, but you don’t have a minimum credit score that you must reach.
If this is your first home, you must wait until you are in the home for at least 90 days.
Your total debt ratio cannot exceed 45%.
If you borrow more than $7,500, you must sign a deed and the loan becomes a lien on your property (second lien).
Paying Mortgage Insurance
Like the traditional FHA loan, you will pay mortgage insurance on your Title 1 loan. The mortgage insurance is 1% of your loan amount of $1 for every $100 of the loan amount. You pay the mortgage insurance at the closing and the lender pays it directly to HUD. If you don’t have the funds to pay the mortgage insurance, you can wrap it into your mortgage, but you’ll likely pay a higher interest rate for doing so.
The FHA Title 1 loan is a great way to get money to improve your home without using credit cards or taking out expensive loans. Like the standard FHA loan, you should shop around to find an FHA approved lender that will qualify you for the FHA Title 1 loan.