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Low Interest Home Repair Loan Program a Good Idea?

By Nathaniel Hutchinson Business and Financial Expert


Although it does not lend money to homeowners for property improvements, the U.S. Department of Housing and Urban Development does provide a low interest home repair loan program of sorts. Instead of providing funds directly to the borrower, HUD insures private lenders against potential losses they might incur on loans they finance. This is meant to encourage lender activity and allow homeowners easier access to funding.

How to qualify

To qualify for a low interest home repair loan program, you must apply with a local credit union, savings and loan association, mortgage company or bank that has been approved to make Title I loans.

Loans can be used for repairs, alterations and site improvements; and, in some cases, a Title I loan can be used alongside a 203k Rehabilitation Mortgage. Interest rates are fixed and typically based on the average market rate in the general area. The rate is negotiable between the borrower and lender. In other words, to get the best rates, contact several Title I-approved lenders and compare offers.

Should I get a loan?

In certain situations, a low interest home repair loan can be invaluable; however, ultimately, the worth of a home improvement loan is defined by how it's used. If you need a new roof, this sort of loan makes a lot of sense. On the other hand, if you're planning to use the loan for improvements that don't add property value, such as a new swimming pool, cosmetic repairs or elaborate landscaping, it probably isn't worth it.

Before you opt to take advantage of this sort of home loan program, be sure you are tackling a much-needed repair or planning an improvement that will actually make the property more valuable, or you could be wasting your money.

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