HUD home improvement loans can be a great way to save money on essential upgrades. These government-backed loans can be easier to qualify for than traditional mortgages.
The best home improvement loans for you will depend on your credit score and the type of renovation you need. Read more about hud home improvement loans at NerdWallet.
203(k) Loans
If you want to purchase a home in need of significant renovations, consider using a 203(k) loan. These loans bundle the cost of a mortgage with the costs of improvements, and you only have to put down as little as 3.5% down. This allows you to make renovations that aren’t possible with a regular rehab loan, and it also means that your loan payments will be based on the total value of the property once the work is completed.
FHA 203(k) loans are available for both new construction and existing properties. They offer a more flexible mortgage with less red tape than standard loan programs. The 203(k) program is designed to finance the repair and renovation of single-family homes, including structural repairs such as foundations or roofs, room additions, modernization of kitchens and bathrooms, and projects that increase energy efficiency and climate resilience.
There are two 203(k) loan options: the standard 203(k) and the limited 203(k). The limited product caters to minor remodeling and non-structural repairs, with a timeline for completion that’s typically less than 6 months, and no consultant requirement. The standard 203(k) loan is designed for more extensive renovations, and requires the services of an FHA-approved consultant to oversee project planning, contractor selection, and draw inspections.
The FHA has recently made several updates to the 203(k) program, which are expected to enhance its effectiveness and flexibility. These include: increasing the maximum allowable renovation cost on the limited product; adding a contingency reserve to both products, allowing for up to 20% of total project costs to be financed; and increasing the allowable fees that consultants can levy on homeowners – a first update to these fees since 1995.
For more information about these updates, talk to your trusted mortgage professional. They’ll be able to help you find the right option for your home improvement needs, and give you tips on how best to approach the 203(k) process.
Title I Loans
HUD offers a number of home improvement programs. These include Title 1 loans, streamlined 203(k) loans and 203(k) refinances. Each type of loan can cover different types of renovation projects. For example, Title 1 loans can cover exterior painting and roof repairs. Unlike 203(k) loans, these loans don’t require a minimum loan amount and they can be used for single-family homes.
In order to qualify for a Title I loan, you’ll need to meet certain requirements. These include a good credit history and the ability to repay the loan on time. In addition, you’ll need to provide the lender with proof of income and employment. You’ll also need to have a debt-to-income ratio below 45%.
To apply for a Title I loan, you’ll want to start by searching the U.S. Department of Housing and Urban Development’s (HUD) list of approved lenders. You can find a lender in your area by entering your zip code into the search tool on the HUD website. Once you’ve found a lender, you’ll need to submit a complete application. You’ll need to provide the lender with an itemized list of the work that you plan to do to your property, as well as a description of any related expenses such as engineering or architectural fees, title, permit and appraisal fees.
A Title I home improvement loan is a great option for homeowners who are looking to make major repairs or upgrades but don’t have enough equity in their home to use a mortgage or home equity line of credit. You can use the loan for a variety of repairs and renovations, including adding a new bathroom or kitchen, installing an accessible shower or a stairlift, adding a porch or deck and making energy-efficient upgrades. You can even use the money to repair a sagging foundation or replace an old roof. In some cases, you may be able to borrow up to $25,000 for your renovation project.