An FHA Title I property improvement loan lets you borrow up to $25,000 through a HUD-approved private lender to repair or upgrade a home you own, with the federal government insuring the lender against loss. Loans of $7,500 or less don’t require a lien on your property, which makes the program unusually workable for smaller projects that wouldn’t justify a home equity loan. HUD doesn’t lend the money or set the interest rate; you apply through a participating bank or credit union, and HUD stands behind the loan.
How Much You Can Borrow
The cap depends on the type of property being improved, and it includes any origination fees rolled into the loan, not just the construction cost.1eCFR. 24 CFR 201.10 – Loan Amounts
- Single-family home: up to $25,000.
- Manufactured home that qualifies as real property (typically on a permanent foundation on land you own): up to $17,500.
- Manufactured home that does not qualify as real property: up to $7,500.
- Multifamily building: up to $60,000 total, or an average of $12,000 per unit, whichever is less.
- Nonresidential property: up to $25,000.
If you already carry a Title I loan on the same property, the combined balance of all Title I loans cannot exceed the maximum for that property type. Where more than one category could apply, the higher cap governs.
Who Qualifies as a Borrower
You need at least a one-half interest in the property. That interest can take three forms: fee simple title, a lease with a fixed term running at least six months past the loan’s final payment date, or a properly recorded land installment contract.2eCFR. 24 CFR 201.20 – Property Improvement Loan Eligibility Life estates are not on that list. If you hold one and you’re not sure whether you qualify, ask a participating lender to confirm before you apply.
Your lender will verify current employment and income. If you’ve changed jobs in the past two years, the lender must also document prior employment and earnings during that period. Self-employed borrowers provide income documentation for any self-employment period within the previous two years.3eCFR. 24 CFR 201.22 – Credit Requirements for Borrower HUD doesn’t publish a minimum credit score. The lender has to conclude that your income can cover the new loan payment along with your housing costs and other recurring debts. If your debt-to-income ratio exceeds HUD’s guidelines, the lender can still approve you by documenting compensating factors in the file.
What the Property Must Be
The home has to be an existing structure, which HUD defines as a dwelling completed and occupied for at least 90 days before you apply. Two exceptions: loans of $1,000 or less, and homes in a presidentially declared disaster area that need emergency repairs.
Eligible property types include single-family homes, multifamily residential buildings, manufactured homes, and nonresidential structures where the improvements benefit the property’s utility.4U.S. Department of Housing and Urban Development. Title I Insured Programs
What You Can Spend the Money On
Loan proceeds must go toward improvements that substantially protect or improve the basic livability or utility of the property.2eCFR. 24 CFR 201.20 – Property Improvement Loan Eligibility That standard covers most functional repairs and upgrades: roofing, foundation work, plumbing and electrical, siding, heating and cooling equipment, and accessibility features like ramps or wider doorways.
Work cannot start before the loan is approved, unless you have prior authorization from HUD or the home was damaged in a presidentially declared disaster area requiring emergency action.
What You Cannot Spend It On
HUD publishes a specific list of ineligible items. It includes swimming pools, outdoor fireplaces, hot tubs, saunas, spas, barbecue pits, landscaping, kennels, satellite dishes, portable dishwashers, standalone freezers, and window air conditioners that aren’t permanently attached to the structure.5U.S. Department of Housing and Urban Development. FHA Single Family Housing Policy Handbook Debt consolidation is explicitly prohibited, so you can’t roll other bills into a Title I loan. Demolition is only eligible when you’re replacing the demolished structure at the same time.
The common thread is that the improvement must serve the home’s core function. When a lender isn’t sure whether a specific project qualifies, the regulation requires them to ask HUD for a ruling before making the loan.
When You Have to Put Up Your Home as Collateral
Loans of $7,500 or less generally don’t require a lien. Any single loan above that threshold, or any combination of outstanding Title I loans on the same property totaling more than $7,500, must be secured by a recorded lien.6eCFR. 24 CFR 201.24 – Security Requirements
When a lien is required, it takes the form of a mortgage or deed of trust signed by you and any other owners. The Title I lien must hold at least a second-lien position. It can sit behind your primary mortgage but generally can’t be pushed to third position or lower. Your county will charge a recording fee.
Repayment Terms and Interest
The maximum repayment period for most property improvement loans is 20 years and 32 days from the date of the loan. Two categories are shorter:7eCFR. 24 CFR 201.11 – Loan Maturities
- Manufactured home qualifying as real property: up to 15 years.
- Manufactured home improvement not qualifying as real property: up to 12 years.
All Title I loans carry a fixed interest rate that you negotiate with the lender. HUD does not set it, but the fixed structure means your payment doesn’t change over the life of the loan.4U.S. Department of Housing and Urban Development. Title I Insured Programs
How to Apply
You apply directly through a lender that HUD has approved to make Title I loans, not through HUD. The official HUD Lender List Search at hud.gov lets you find participating banks and credit unions. Not every FHA-approved lender offers Title I, so confirm participation before you gather paperwork.
Expect to provide pay stubs covering the last 30 days, W-2 forms for the previous two years, and signed federal tax returns for the previous two years.8Consumer Financial Protection Bureau. Create a Loan Application Packet Bring proof of your property interest, whether that’s a deed, a recorded lease, or a land installment contract. If you’re using a contractor, bring a detailed written estimate.
Before disbursing funds, the lender must give you a written notice explaining that the loan is insured by HUD and describing what HUD can do to recover the debt if you default.9eCFR. 24 CFR 201.26 – Conditions for Loan Disbursement Read it carefully. HUD insures the lender, not you. If you default, HUD pays the lender’s claim and then comes after you for the debt.
Origination fees can be rolled into the loan, but only up to the program cap for your property type. If you’re borrowing the full $25,000 on a single-family home, there’s no room to add fees on top; you’ll pay them out of pocket at closing. A dealer, contractor, or third party is not allowed to front those costs for you. Referral fees are flatly prohibited: no one may pay a dealer, contractor, real estate broker, or loan broker for steering you toward a Title I lender.10eCFR. 24 CFR 201.25 – Charges to Borrower
Doing the Work Yourself vs Hiring a Contractor
You don’t have to hire a contractor. HUD allows self-help work, but you have to give the lender a detailed written description of the work you plan to do, the materials you’ll use, and the estimated cost. Itemize it rather than submitting a rough estimate.
When you hire a dealer or contractor, the process adds a step at the end. The lender must obtain a completion certificate on a HUD-approved form, signed by both you and the dealer, confirming the work was finished according to the contract and that you didn’t receive any kickback or cash bonus.9eCFR. 24 CFR 201.26 – Conditions for Loan Disbursement Both signatures carry criminal and civil fraud penalties. The lender must also conduct a telephone interview with you before releasing funds to the dealer, to get your oral confirmation.
Penalties for False Statements
Using loan funds for prohibited purposes or misrepresenting information on your application carries federal criminal exposure. Making a false statement to influence HUD’s decision to insure a loan is a crime under 18 U.S.C. § 1010, punishable by up to two years in prison and a fine.11Office of the Law Revision Counsel. 18 USC 1010 – Department of Housing and Urban Development Transactions The broader federal false-statements statute, 18 U.S.C. § 1001, carries up to five years in prison for knowingly making a materially false statement to any federal agency.12Office of the Law Revision Counsel. 18 USC 1001 – Statements or Entries Generally These penalties apply equally to borrowers and dealers, and the completion certificate that dealers sign at the end of a project spells them out.