The FHA and USDA have low-interest home repair loans to help homeowners pay for costly renovations and repairs. There are also some government home repair loans from sponsored organizations, like Fannie Mae.
Some loans, such as the FHA 203(k) Rehab Loan, combine the cost of renovations and the cost of the home into one, singular payment. Borrowers can finance the cost of repairs for existing homes as well as construction of new homes.
Homeowners can apply for these FHA loans in an amount between $5,000 and $35,000. However, the total amount cannot be more than 110% of the property’s appraisal value.
These FHA loans are only available for homes that are deemed safe, secure, and sound. When it comes to specific renovations, some limitations may apply.
The most common renovations that are approved for 203(k) loans include the following:
- Cosmetic improvements
- Elimination of health and safety hazards
- Energy conservation improvements
- Enhancing accessibility for a disabled person
- Floors replacement or treatments
- Landscape work and property improvements
- Plumbing reconditioning or replacement
- Roofing, gutters, and downspouts renovation and replacements
- Structural alterations and reconstruction
The USDA Section 504 Home Repair program funds repairs, improvements, and modernization of homes for qualified applicants. Borrowers have up to 20 years to repay the repair loan, and the interest rate is fixed at 1%.
Currently, the maximum loan amount is $20,000. Loans more than $7,500 require a full title service, which has fees.
Generally, to meet the qualifications for Section 504 government home repair loans, applicants must:
- Own and live at the property, which must be located within a recognized rural area.
- Be unable to get funds from a lender.
- Have a household income of less than 50% of the median income for the area.
Seniors 62 years of age or older who are unable to repay the loan may qualify for a grant up to $7,500. Recipients only pay the money back if they sell the property within three years of receiving the grant.
Homestyle Renovation loans offered through Fannie Mae can be used to finance repairs without the FHA’s strict livable housing conditions. The property does not have to be habitable, and borrowers can apply for up to six months of mortgage payments while the home is inhabitable. However, the renovation cannot call for a complete teardown of the structure.
Homestyle Renovation loans typically have lower interest rates than personal loans, credit cards, and home equity lines of credit (HELOC). Loan amounts can be the lesser of 75% of the appraised value or the purchase price plus renovation costs.
Fannie Mae also offers HomeStyle Energy loans, which fund renovations to reduce utility costs and improve energy conservation. Homeowners can use funds for weatherization and improvements to the home’s resilience to natural disasters.
The VA has renovation grants and loans for veterans and families. Service members and spouses can apply for a basic renovation loan, energy efficiency loan, or cash-out refinancing. Individuals can review their options with a VA representative, as some loans have higher fees.