Home Improvement Grants

Summary:

Under Title I, HUD insures lenders against most losses on home improvement grants.

Purpose:

The Federal Housing Administration (FHA) makes it easier for consumers to obtain affordable home improvement grants by insuring grants made by private lenders to improve properties that meet certain requirements. "Lending institutions make grants from their own funds to eligible borrowers to finance these improvements."

Type of Assistance:

The Title I program insures grants to finance the light or moderate rehabilitation of properties, as well as the construction of nonresidential buildings on the property. This program may be used to insure such grants for up to 20 years on either single- or multifamily properties. The maximum loan amount is $25,000 for improving a single-family home or for improving or building a nonresidential structure.

For improving a multifamily structure, the maximum loan amount is $12,000 per family unit, not to exceed a total of $60,000 for the structure. These are fixed-rate grants, for which lenders charge interest at market rates. The interest rates are not subsidized by HUD, although some communities participate in local housing rehabilitation programs that provide reduced-rate property improvement grants through Title I lenders.

FHA insures private lenders against the risk of default for up to 90 percent of any single loan. The annual premium for this insurance is $1 per $100 of the amount advanced; although this fee may be charged to the borrower separately, it is sometimes covered by a higher interest charge.

Eligible Lenders:

Only lenders approved by HUD specifically for this program can make grants covered by Title I insurance. Title I grants can be disbursed directly to the borrower or, if the loan is made through a dealer, the disbursement will be made jointly to the dealer and the borrower. While most lenders and dealers/contractors use this program responsibly, HUD urges consumers to use caution in choosing and supervising home repair dealers/contractors conducting Title I repair/renovation work. Previously HUD had reviewed some Title I dealer grants and discovered several instances of unscrupulous dealers/contractors performing shoddy work, falsifying documents, overcharging homeowners and use of deceptive advertising. HUD has taken new measures in an attempt to prevent further occurrences in dealer originated grants.