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Many FHA borrowers are interested in home improvement loans or rehab loans, and there are multiple options for borrowers. There is an FHA 203(k) Rehabilitation Loan program, and the FHA and HUD also offer something called the Title I loan.

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FHA Title I Loan Basics

December 16, 2011

FHA Title I Loan Basics
Many FHA borrowers are interested in home improvement loans or rehab loans, and there are multiple options for borrowers. There is an FHA 203(k) Rehabilitation Loan program, and the FHA and HUD also offer something called the Title I loan.

The FHA's Title I loan program insures loans to finance rehabilitation of properties, as well as the construction of nonresidential buildings on the property. It is intended for "light or moderate" repairs/rehab.

Title I loans feature terms up to 20 years on either single- or multifamily properties. The maximum loan amount is "$25,000 for improving a single-family home or for improving or building a nonresidential structure" according to the FHA official site.

For multi-family unit properties, there is also an FHA Title I loan that has a maximum of $12,000 per family unit, "not to exceed a total of $60,000 for the structure."

FHA Title I loans are fixed-rate loans (they don't come with variable rate options) and have typical market rates for the interest--interest rates for Title I loans are not subsidized by the FHA or HUD, but "some communities participate in local housing rehabilitation programs that provide reduced-rate property improvement loans through Title I lenders" according to the FHA.

Only FHA/HUD approved lenders can offer a Title I loan. To be eligible to apply for a Title I loan, borrowers must be either "the owner of the property to be improved, the person leasing the property (provided that the lease will extend at least 6 months beyond the date when the loan must be repaid), or someone purchasing the property under a land installment contract".

There is a list of approved uses for Title I loans. The FHA rules permit loan proceeds to be used for "permanent property improvements," and for renovations that "improve the basic livability or utility of the property-including manufactured homes, single-family and multifamily homes, nonresidential structures, and the preservation of historic homes."

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