FHA Title 1 Loans: What You Need to Know

An FHA title 1 loan is a fixed-rate loan for housing improvement, repair, and rehabilitation, which is insured by the Federal Housing Administration. The US Department of Housing and Urban Development is able to provide eligible borrowers with a large number of FHA housing improvement loans to help borrowers repair their homes. FHA title 1 loans are issued to private individuals by project-approved lending institutions. Loans are issued based on the borrower’s ability to repay the loan, which is determined by factors such as credit history and job stability.

Details of FHA Title 1 loan:

  • The maximum loan period for a single-family or multi-family structure is 20 years.
  • The maximum loan period for a ground-based mobile home is 15 years.
  • The maximum loan amount for a single-family home is $25,000.
  • A 203(k) loan, known as an FHA-insured product, is often used to finance major repairs and renovations.

Eligibility and Requirements on Applying for FHA Loans:

  • Credit score

You will qualify for an FHA loan if your credit score is equal to or higher than 500. Traditional mortgages have a minimum credit score of 620 but vary by the loan program and the lenders.

  • Limits on FHA loans

The maximum loan size of FHA depends on the location of the house, while the size and duration are also limited. Loans for single-family homes are limited to $2,500 for 20 years. The maximum loan limit for a multi-family building is $12,000 per unit but not more than $60,000.

  • Minimum down payment

If your credit score is between 500 and 579, then your FHA loan has a minimum down payment of 10%. If your credit score is equal to or greater than 580, then the minimum down payment will be 3.5%.

  • Mortgage insurance

When home-buyers pay less than 20% down payment, most lenders require private mortgage insurance (PMI) for traditional loans. While all FHA loans have mortgage insurance no matter how much you paid for a down payment, if you made a down payment of less than 10%, then mortgage insurance would be required.

  • Debt-to-income ratios

Due to the Federal Housing Administration and traditional mortgages, your total monthly debt will likely account for 50% of your pre-tax income. The Federal Housing Administration requires a debt-to-income ratio of no more than 50%, but its requirements vary from different credit score or other factors.

Reasons to apply for FHA loans:

FHA title 1 loans are often used to improve homes to make them more livable. Other common uses are: roofing, structural renovation, and maintenance. Single or multi-family homes are eligible for loans, but eligible types of repairs will vary by structure. Compared to traditional loans, FHA loans allow lower credit scores, as well as lower payments on monthly mortgage insurance.

Lists for Best FHA Lenders:

  • Quick Loans: Best for FHA Overall
  • Rocket Mortgage: Best for online experience
  • New American Funding: Best for nontraditional credit history
  • Vylla: Best for nontraditional credit history
  • PrimeLending: Best for FHA refinance
  • Guild Mortgage: Best for online experience
  • Citibank Mortgage: Best for first-time homebuyers
  • Flagstar: Best for first-time homebuyers
  • Navy Federal: Best for low down payment
  • Bank of America: Best for low down payment

Featured image: DepositPhotos – AntonMatyukha