Government Home Improvement Loans: 4 Ways to Finance a Remodeling Project

Most Americans have a vague idea that there are government loans available for home improvements or needed repairs. But, a lot of people don’t know where to look for these loans and what it takes to qualify. 

“These grants and loans are usually going to somebody with lower income, or someone who owns a very specific rural property,” says Corey Sayers, VP of Experience at Acorn Finance. Certain USDA loans, for instance, are only available to people in designated rural communities. Other loans and grants are designed for disabled veterans or elderly individuals. 

In this article, we’ll go over the most common government home repair loans and grants available, and what may help if they are not an option for you.

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Government home improvement loans vs. traditional loans 

While government loan programs do exist, many of them have very strict eligibility requirements or are only an option when there are no other funding sources available.

The first step should always be to see whether a traditional home improvement loan is an option. Sayers explains that pre-authorization for a loan at a company like Acorn Finance just takes a few minutes and is without risk. “There is no impact to your credit score if you don’t qualify,” he says.

Since a lack of access to traditional credit is one of the criteria for some low income loans, what you learn during the prequalification process can help you decide what to do next. 

Federal Housing Administration (FHA) 203(k) Rehabilitation Mortgage

The FHA offers two loans under its 203(k) program. 

The Limited 203(k) mortgage allows buyers to allocate up to $35,000 of a mortgage toward repairs, improvements, and upgrades. This provides a quick and easy source of cash for needed repairs, such as those identified by an FHA appraiser or a home inspector.

They can be used to make a home move-in ready or more livable, such as replacing damaged carpet or painting walls. The loan’s terms allow a homeowner to make non-structural repairs or improvements to a home they currently occupy. The loans can also be used to get a home ready to sell.

The Standard 203(k) program is for major rehabilitation and repair of single-family homes. To qualify for this loan, the cost of the repair project must be at least $5,000. The total value of the property is bound by the FHA mortgage limit for the area. Area limits depend on the local market. The Standard 203(k) is a tool used to revitalize neighborhoods and to make it possible for more people to afford home ownership. 

USDA Section 504 Home Repair Program

USDA loans are a tool to help people in rural and disadvantaged areas keep their homes livable and safe. This loan program is for very low income homeowners and makes it possible for them to improve, repair, or modernize their houses. 

To qualify, you need to be the owner of the home, and you need to live on the property. While income limits vary by county, you need to fit into the category of “very low income” in your region. You also need to be unable to acquire affordable credit somewhere else. People who are 62 or over may also be able to qualify for a grant.

The maximum loan under this program is $40,000, with a 20-year term and an interest rate fixed at 1%. If you fit the requirements, you can apply through your local Rural Development office any time of year. 

VA Home Repair Programs

There are a few government home improvement loans that are designed to help out active duty service members and veterans. Each has its own eligibility criteria and purpose.

Tip

There are a few government home improvement loans that are designed to help out active duty service members and veterans.

Disability housing grants like the Specially Adapted Housing (SAH) grant are for veterans who have qualifying disabilities connected to their service. These grants can be used to buy or modify a home to make it accessible and to foster independent living. Improvements can include ramps, wider doorways, and whatever else a veteran needs to make it easier to live independently in their home. The VA has a list of qualifying service-connected disabilities which include blindness in both eyes, loss of use of more than one limb, certain severe burns and other issues. As of 2024, the maximum SAH grant is $117,014. To qualify, you or a family member must own the home. 

Native American Housing Improvement Program

The Housing Improvement Program (HIP) is designed to foster improvements that would eliminate substandard housing for very low income eligible Native Americans who live in approved tribal service areas. To qualify for assistance, you must be a member of a federally recognized tribe, live in an approved tribal service area, and have an income that is not more than 125 percent of the US Department of Health and Human Services Poverty Guidelines. To find out if you qualify, contact the closest Bureau of Indian Affairs office. They can tell you what help is available and how to qualify for a grant or loan. 

What about those “free money from the government” ads?

When you’re up late at night watching TV, or browsing certain corners of the internet, you may see eye-catching advertisements promising free government money just for the asking. These offers may also pop up in your text messages or on messaging platforms like WhatsApp.

These offers usually involve big promises of grants available for household bills, education, home repairs, or other personal needs. 

Unfortunately, these ads are universally scams. The government does not offer free money for personal needs. And, they won’t reach out to potential beneficiaries unprompted; usually, if you want to apply, you have to reach out to them.

Some of these “free money from the government” scammers just sell fake lists of loan and grant resources. Others collect personal information such as your bank account number, Social Security number or credit card information. Once they have this information, they can use it to drain your accounts or steal your identity to use to draw others into the scam.

If you encounter one of these scams, send no information. Report the scammers to the Federal Trade Commission using its fraud reporting tool. The more scams are reported, the lower the chance that someone else falls prey.

Important

Free money from the government ads often scams

What if you don’t qualify for a loan?

“If you qualify for a government assistance program, it’s highly likely that you’re going to have trouble finding additional traditional loans,” Sayers says. “However, Acorn Finance presents credit monitoring and credit building offers on our platform.”

These programs, available through Acorn Finance’s partners, can help potential borrowers learn more about personal finance while they rebuild credit and increase their credit scores. “Essentially, they give you the tools and resources to help you understand the best ways to rebuild your credit,” he says.

He emphasizes that life happens, and a “no” from a traditional lender today is not a “no” forever. With the help of credit rebuilding tools, an individual can improve their financial outlook and, over time, get into a more stable situation. “That’s just the start of the climb to the next step,” Sayers says. 

Other credit building tools

Building credit is a step-by-step process. There are tools available to help you learn more about your personal finances and to build the sort of credit history that can make lending opportunities available to you.

AnnualCreditReport.com is a resource that allows you to access free credit reports from the three major credit reporting bureaus. 

The federal Office of Financial Readiness has educational resources to help you learn more about everything from saving and investing to what goes into a person’s credit score. 

For homeowners who want to make updates and repairs but don’t have the means right now, these resources can be the tools you need to improve your financial situation and get access to future opportunities down the road. 

Not sure where to start? Acorn’s simple application has no impact on your credit score and can help you learn more about where you are now so you can get to where you want to be.