Fixing Up Your Home and How to Finance It
Your home is an investment in living as well as in savings. If neglected, it will pay no dividends. If properly maintained and improved, it will pay a high yield in comfort and usefulness for your family and in avoidance of costly repair bills.
Home improvements also tend to raise neighborhood standards and, as a result, property values. From an economic standpoint, home improvements mean higher employment, increased markets for materials and home products-and therefore a more flourishing community.
As a rule, the thriftiest way to finance improvements is to pay cash. But if you lack the funds even for immediate repairs such as replacing a worn-out roof or a broken-down furnace, you should weigh the cost of borrowing against the cost of delaying the work. If you have to borrow, you want to do it in the least expensive way. Use caution when using credit card borrowing because of interest rates.
If you borrow money for the improvements, you should go to your bank or other lender and apply for a loan. After checking to see if your credit is satisfactory, the lender defines the terms of the loan and you must agree to them before signing the note. Do not proceed with home improvement plans until you understand all of the costs involved.
Today there are a number of good plans for financing home improvements on reasonable terms. What kind of loan is best for you depends primarily on the amount of money you need to borrow.
The Title I Property Improvement Loan Program
If the equity in your home is limited, the answer may be an FHA Title I loan. Banks and other qualified lenders make these loans from their own funds, and FHA insures the lender against a possible loss. This loan insurance program is authorized by Title I of the National Housing Act.
FHA-insured Title I loans may be used for any improvements that will make your home basically more livable and useful. You can use them even for dishwashers, refrigerators, freezers, and ovens that are built into the house and not free-standing. You cannot use them for certain luxury-type items such as swimming pools or outdoor fireplaces, or to pay for work already done.
Title I loans can also be used to make improvements for accessibility to a disabled person such as remodeling kitchens and baths for wheelchair access, lowering kitchen cabinets, installing wider doors and exterior ramps, etc. Another use is energy conserving improvements or solar energy systems.
Improvements can be handled on a do-it-yourself basis or through a contractor or dealer. Your loan can be used to pay for the contractor’s materials and labor. If you do the work yourself, only the cost of materials may be financed.
Some of the advantages of the Title I loan insurance program are:
|You do not have to live in any particular area to get one of these loans.|
|You seldom need any security for loans under $7,500 other than your signature on the note, and you need no cosigner.|
|You do not have to disturb any mortgage or deed of trust you may have on your home.|
|To obtain a loan, you only need to own the property or have a long-term lease on it; fill out a loan application that shows you are a good credit risk; and execute a note agreeing to repay the loan.|
|Your loan can cover architectural and engineering costs, building permit fees, title examination costs, appraisal fees, and inspection fees.|
|You are not hampered by a lot of red tape. Usually only the lender has to approve your loan, and can give you an answer in a few days. When the work is finished, you will need to furnish the lender with a completion certificate.|
|You receive some protection from the wrong kind of dealer, because FHA requires that any dealer who arranges a loan for you must first be approved by the lender.|
Title I Property Improvement Loan Program Maximum Loan Amounts and Terms
HUD/FHA does not set the interest rate. Interest rates are negotiated between the borrower and the lender.
The maximum amount for a Single Family property improvement loan for the alteration, repair or improvement of an existing single family structure is $25,000 and the maximum term is 20 years.
The maximum amount for a property improvement loan for the alteration, repair or improvement of a Manufactured (Mobile) Home that qualifies as real property is $25,090 and the maximum term is 15 years.
The maximum amount for a property improvement loan for the alteration, repair, or improvement of an existing Manufactured (Mobile) Home classified as Personal Property is $7,500 and the maximum term is 12 years.
The maximum amount for a Multifamily Property Improvement loan for the alteration, repair, improvement or conversion of an existing structure used or to be used as a dwelling for two or more families is $60,000, but not more than $12,000 per dwelling unit and the maximum term is 15 years.
The maximum amount for a Nonresidential Property Improvement loan for the construction of a new nonresidential structure, or the alteration, repair, or improvement of an existing nonresidential structure is $25,000 and the maximum term is 20 years.
Finding a Title I Lender
To find an FHA-approved lender in your area, call HUD’s Customer Service Center on our toll-free number: (800) 767-7468 (TTY: (800) 877-8339) for a list of lenders in your State and additional copies of this brochure.