Your Mortgage : Title I Loans Aid Low-Equity Owners
Would you like to fix up your house or condominium, but you don’t have enough equity to qualify for a loan? If so, an FHA “Title I” home-improvement loan can help.
Any credit-worthy person can borrow up to $17,500 under the little-known program. Although the loans are insured by the Federal Housing Administration, they’re actually made by FHA-approved banks, savings and loans, credit unions, mortgage bankers and mortgage brokers.
People with little or no equity are attracted to the Title I program because it’s one of the few ways they can get money for fix-up projects.
Most lenders won’t make a conventional home-improvement loan unless the borrower has at least a 20% or 30% equity stake. But since Title I loans are backed by the federal government, lenders are willing to make them even if the borrower has no equity at all.
There are, however, some restrictions on the way you use the money you borrow.
“You can’t use the proceeds for luxury items, like swimming pools or hot tubs,” said Gary Zent, a loan officer with California Loan Funding Inc. in Escondido. “And you can’t use the money to pay off other bills--it has to be used to improve your home.”
Fortunately, Zent said, most typical home-improvement projects are acceptable--from remodeling or building a room to installing new windows or carpeting.
You can even use the money to buy appliances, as long as they’re built-ins.
“Another nice thing about the program is that your application doesn’t take long to process,” said Rosa Nunez, a loan officer with broker Mortgage Network Inc. in South Gate.
“It usually takes about three weeks to get the money, and sometimes it doesn’t even take that long.”
In order to get a Title I loan, Nunez said, you must first fill out a standard loan application. You also have to complete a form that details your proposed home-improvement project.
As a general rule, your project must be completed no later than six months after you get your loan. The lender will visit your home at the end of six months to verify that the work has actually been done.
If the work you promised to do hasn’t been completed, the lender can foreclose on your Title I loan. It may, however, grant a six-month extension on your loan if you have run into unforeseen problems--ranging from a sinking foundation to unexpected electrical problems.
While the Title I program can be an answer to your prayers if you want to fix up your home and don’t have much equity, you should know about its two biggest drawbacks.
First, borrowers typically have to pay an unusually high number of up-front “points” to get one of these loans. A point is equal to 1% of the total loan amount.
If you took out a traditional second mortgage, you’d probably pay about two points for the loan.
But it’s not uncommon to see lenders charge between six and 10 points--$1,050 to $1,750--to set up a $17,500 Title I loan, in part because the borrower’s low equity stake makes the loan a bit riskier.
In addition, rates on Title I loans are usually two or three points higher than rates on conventional seconds.
“If you’ve got enough equity to qualify, you’re usually better-off taking out a (conventional) second mortgage instead of a Title I loan,” Zent said.
Until now, finding a lender willing to make Title I loans could be difficult. In part, that’s because the program’s $17,500 limit doesn’t provide lenders with much of a profit: They can usually make a lot more money by making bigger loans.
Fortunately, the FHA has recently made it a bit easier to locate financial institutions that make Title I loans. “You can call a toll-free number, and we’ll send you a list of (Title I) lenders in your area,” said Bill Glavin, an FHA spokesman in Washington.
Glavin said the new, toll-free number is (800) 733-4663.
You might also be able to find one of these lenders by thumbing through your local phone book. Most mortgage brokers and lenders who make Title I loans say so in the ads they take out under the “loans” heading of the Yellow Pages.
Southland lenders who take part in the program are listed below. The list was compiled by the FHA in March, and is subject to revision as some financial institutions drop out of the program while others have signed up.
HUD Title I Lenders Below are some of the Southland lenders that make FHA Title I loans.
Lender Name City Telephone Mortgage Network Inc. Anaheim 714-938-1050 Mortgage Network Inc. Bellflower 213-925-8474 American City Mortgage Corp. Carson 213-327-7775 Sun West Mortgage Co. Inc. Cerritos 213-924-7884 SCF Enterprises Inc. Chatsworth 818-407-5550 North American Thrift & Loan Corona del Mar 714-673-7750 Funders Mortgage Corp. America Covina 818-915-8351 Security Pacific National Bank Downey 213-923-5551 Entron Mortgage Inc. El Monte 818-575-3001 The Money Store California Inc. Encino 818-501-3060 California Loan Funding Inc. Escondido 619-489-0899 U-B-U Mortgage Corp. Garden Grove 714-537-2200 Inter Mountain Mortgage Hacienda Heights 818-961-6066 Citizens Thrift & Loan Assn. Irvine 714-648-0830 First American Capital Bank NA Laguna Beach 714-497-6511 Antelope Valley Bank Lancaster 805-945-4511 LBVAMC Federal Credit Union Long Beach 213-498-1250 Family Federal Savings Bank Los Angeles 213-295-3381 Grand Capital Mtg-Inv. Co. Inc. Los Angeles 213-641-7891 Royal Thrift & Loan Los Angeles 213-479-1666 Tiger Federal Credit Union Los Angeles 213-646-3084 University Credit Union Los Angeles 213-825-8228 Unicor Funding, Inc. Mission Viejo 714-582-3777 Capitol Thrift & Loan Napa 707-253-2900 Investors Thrift & Loan AS Northridge 818-363-4233 Safeway LA Emp Fed Cr Union Norwalk 213-864-2524 First Bankers Mortgage Corp. Oceanside 619-722-0123 Master Financial Inc. Orange 714-939-3100 Antelope Valley Bank Palmdale 805-273-9400 Countrywide Thrift & Loan Pasadena 818-304-8400 Courts + Records Fed C U Pasadena 818-792-1808 Sycamore Financial Group Inc. Rancho Cucamonga 714-989-6993 Directors Mortgage Loan Corp. Riverside 714-784-4830 Pacific Thrift & Loan Santa Monica 213-829-9552 Windtree Financial Corp. Sherman Oaks 818-986-3388 The Mortgage Network Inc. South Gate 213-566-1751 National Mortgage Bk Group Inc. South Pasadena 213-256-5252 First Residential Mortgage Inc. Upland 714-946-2802 SFI Federal Credit Union Vernon 213-589-9641 Huntington Pacific Thrift-Loan West Covina 818-962-3446 St. Christophers Federal C U West Covina 818-962-5449 Pacific Thrift & Loan Woodland Hills 818-883-6893
SOURCE: Federal Housing Administration
