Home Improvement

In the non-FHA world, homeowners are sometimes able to refinance their homes and use their equity to get cash to finance home improvements. FHA’s “streamline” refinance program is designed only for lowering monthly payments however, and not for cash to be taken out of equity. However, FHA also has several programs designed to help homeowners make needed improvements to their homes. Title I Property Improvement Loan Insurance is a program designed to assist homeowners in borrowing up to $25,000 to make light to moderate repairs to their homes.

For borrowers who wish to purchase a home to rehab, there is a different program. The section 203(k) FHA program for rehabilitation home mortgage insurance can be used to finance the purchase price along with the estimated cost of rehabilitation.

For those who may be purchasing a HUD home that is in need of rehabilitation, FHA will often offer incentives such as allowances for needed upgrades and improvements. Also, FHA’s Energy Efficient Mortgage program allows the cost of energy efficiency modifications to be financed along with the total purchase price of the home. Other programs are available that are tailored to specific audiences, such as low income homeowners, rural homeowners, or Native Americans wishing to buy or improve homes on native lands.

FHA’s section 220 programs for improvement loans in urban areas can finance improvements to homes in defined redevelopment and urban renewal areas. Section 220 loans are often made in conjunction with local governments’ urban redevelopment programs. Section 220 loans are not available everywhere, only in designated urban renewal areas.

Homeowners should always be wary of contractors who offer unsolicited assistance in obtaining a home improvement loan. Homeowners should work directly with approved Title 1 lenders and FHA counselors.