FHA Title 1 loans offer low and no-money-down home improvement loans to borrowers who do not qualify for a standard home equity loan, but do qualify for an FHA loan. These loans are federally backed but are issued directly through private investors using their own funds. The title to the property remains with the government. Title insurance is paid to the government when the loan is made, and the government sells the property at the end of the term. However, there are a few disadvantages to these loans. They are a better option for low and moderate-income families that qualify for a conventional mortgage loan and have good credit.
FHA loans were designed to help lower and moderate-income families make home repairs and renovations that are needed to stay in their homes. The majority of people who qualify for FHA title loans are families who own their home outright or owe nothing on it. These loans can be very helpful in completing necessary repairs and renovations before selling. In addition, they are a great supplement to a conventional mortgage. Here are a few benefits of an FHA title loan:
No income verification – Unlike most home improvement loans, an FHA title 1 loan does not require income verification. This means that a borrower who has been turned down for a conventional mortgage loan because he or she does not have enough income to qualify can apply for an FHA loan, and if he or she qualifies, the approval can come even sooner than if the borrower had been applying individually. Borrowers who qualify can pay up to the maximum amount allowed for the loan per unit, as well as agreeing to pay their interest rate for the full duration of the loan term. In some cases, the amount that can be borrowed per unit may not exceed the maximum amount allowed for all units in a single transaction.
Eligibility is based on a borrower’s credit history – Unlike a conventional mortgage insurance policy, which is based solely on credit information, an FHA title loan requires more information for evaluation. Applicants who do not have perfect credit histories, or who have made late payments, or who have debts that exceed the lender’s loss mitigation limit will not typically qualify. Likewise, borrowers who have purchased a home within the past three years will also typically be turned down. Likewise, borrowers who own their homes for less than a year will also be ineligible. Loan eligibility requirements vary from lender to lender, so applicants should shop around to find the lender that best matches their individual needs. In order to make an FHA title loan work, a borrower must be able to prove that he or she will be able to repay the loan, and he or she must be able to prove that the sale of his or her home to the lender would not violate any municipal laws.
An FHA title 1 loan is offered through a HUD-approved mortgage company. The lender does not carry out the loan underwriting process used by conventional mortgage companies. Instead, the lender relies on data provided by a local housing agency to decide if the borrower is a good candidate for the loan program. Housing agencies submit data on current market rents and sales prices; income levels of local residents; demographic data such as race and ethnicity; and many other criteria. Once the data is received by the lender, he or she compares it with the current property price in the area to make an accurate determination of a borrower’s eligibility for the title loan program.
To find out if you qualify for an FHA title 1 loan, your first step should be to contact your local HUD office. HUD offers a loan eligibility calculator on its website that allows you to determine if you are eligible for this type of mortgage. You will need to provide the name and address of the property in question, the current mortgage rate, and the interest rate you currently pay on a regular basis. You will also need to indicate whether or not you own the home currently and if so, when your home was purchased by the lender.
A cash-out refinance is not available on FHA title loans. There are other methods of refinancing available including loans with various loan terms. For example, you may choose a fixed-rate or a revolving-rate mortgage. If you own the home and have equity built up on it, you may also qualify for an FHA loan term that allows you to use your home as equity. You can learn more about the different financing options available to you by speaking with a HUD customer service representative. In some cases, you may even be able to save money by using one of the various loan terms that you can choose from.
On the downside, borrowers who obtain an FHA title loan pay higher down payments and closing costs than those who opt for a conventional loan. Additionally, borrowers may pay higher interest rates because they do not qualify for flexible loan terms. To learn more about finding affordable loan options, contact a HUD approved housing counseling agency today. They can help you get the most affordable mortgage possible and inform you of qualifying opportunities with various mortgage lenders. HUD’s Online FHA loan application can help you find the right home improvement loan to meet your goals.