Written By: Glenn Michaels, Op-Ed Writer
Everyone has heard about FHA loans that are insured by the United States Department of Housing and Urban Development (HUD). However not everyone knows that FHA first mortgages fall under Title II loans.
HUD also has Title I Home Improvement Loans. These loans are also insured by HUD. HUD insures private lenders against loss on property improvement loans that they make. The applicant must have a good credit history and the ability to repay the loan in regular monthly payments. Both large and small improvements can be financed. Remember HUD does not lend Title I loans, they only insure the lender against the borrower’s default.
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Loans on single family homes may be used for alterations, repairs and for site improvements. Loans on multifamily structures may be used only for building alterations and repairs. Title I can be used in conjunction with a 203(k) rehabilitation mortgage.
A property owner may apply at any lender (bank, Mortgage Company, savings and loan association, credit union) that is an approved Title I lender.
Title I loans are available for a single family home at a maximum of $25,000.00. A manufactured home on a permanent foundation that is taxed as and classified as real estate is limited to $25,090.00. A manufactured home classified as personal property is limited to $7,500.00. A multifamily structure is limited to an average of $12,000.00 per living unit, up to a total of $60,000.00.
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The maximum loan terms differ depending on the structure obtaining the loan for. A single family home has a twenty (20) year limitation. A manufactured home on a permanent foundation is limited to fifteen (15) years. Manufactured home classified as personal property is limited to twelve (12) years. Multifamily structures are limited to twenty (20) years.
Any amount over $7,500.00 must be secured by a mortgage or deed of trust on the property. There is no prepayment penalty on these loans. The structures must have been completed and occupied for a minimum of ninety (90) days.
The interest rate is a fixed rate based on the most common rate in the area. It is negotiable between the borrower and the lender. Perspective borrowers should shop around to obtain the best Title I rates as they are almost always higher than a Title II rates as they are usually in the second lien position.
About The Author
Glenn Michaels - As an op-ed writer, Glenn Michaels is a mortgage underwriting instructor for CampusUnderwriter (www.MortgageUnderwriter.org). As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years.
