How to Get a Government Loan for Remodeling Your Home
Renovating your home is an expensive prospect.
Good news: There are government loans and grants available to homeowners who qualify.
In many cases, you don’t apply directly to federal government agencies for this money. The funds are assigned to local jurisdictions or private lenders who negotiate the funding with you.
The funds can take the form of loans (which usually have to be paid back) or grants (which usually don’t) or loan insurance (which takes on some of the risk of the loan, making you more likely to be approved by a lender).
Why does the government do this? According to this Housing and Urban Development report, homeownership and maintenance of housing are “significant factors in the nation’s economy,” having a positive effect on employment and community wealth. A homeowner also has a deeper investment and a bigger stake in the community.
There are often strict eligibility guidelines (e.g., age, income, military service). But if you meet the requirements, these are great opportunities to update your home.
|
$1,000-50,000
Loan Amount
|
8.49-35.99%
APR
|
3–7 years
Terms
|
560
Minimum Credit Score
|
Disclaimer
Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 8.49%-35.99%. All personal loans have a 1.85% to 9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. Loans feature repayment terms of 24 to 84 months. For example, if you receive a $10,000 loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Personal loans issued by Upgrade's bank partners. Information on Upgrade's bank partners can be found at https://www.upgrade.com/bank-partners/.
HUD programs
The U.S. Department of Housing and Urban Development (HUD) has several funding opportunities for homeowners looking to renovate.
HOME Investment Partnerships Program (HOME)
- Intended for low-income homeowners
- Can be loans, loan insurance, or grants
- Distributed through local participating jurisdictions
Tip
HUD annually distributes funds to states and localities (known as participating jurisdictions, or PJs) to make housing more affordable for low-income residents.
The PJs have flexibility in how to distribute these funds. They can be grants, loans, or loan insurance. In all cases, however, the homeowner must qualify as “low-income” (at or below 80 percent of area median income).
The value of your home after your renovations can be “no more than 95%” of the median purchase price of homes in the area.”
Find out what’s available in your area by contacting your local HUD office.
FHA-insured 203(k) loan
- Covers a home purchase and renovations with a single loan
- Current homeowners can refinance existing mortgage
- Loan amount based on post-improvement value of home
203(k) loans are intended to cover the purchase of homes in need of renovations as well as the cost of the renovations.
Since the Federal Housing Administration (FHA) insures these loans, lenders can be more lenient regarding the credit score of the borrower. If your score is 580 or higher, you can apply a minimum down payment of 3.5%. (A lower credit score will require a 10% minimum down payment.)
Qualifying improvements are generally utilitarian, not luxuries. Think repairs, upgrades, and accessibility improvements; not gazebos, swimming pools, or landscaping.
If you already own a home, the 203(k)-insured mortgage would pay off the rest of your mortgage and replace it with a new one, essentially a cash-out refinance with the excess funds put in escrow for use towards the rehab.
Search for qualified lenders on the HUD website.
Title I Property Improvement Loans
- HUD-insured loans protect or improve livability of home
- No collateral needed up to $7,500; negotiable fixed-rate interest
- Maximum loan for a single family house: $25,000
If you don’t need to purchase a home or refinance one you already own, a Title I Property Improvement Loan might be what you need.
HUD insures loans from qualified lenders for improvements that “must substantially protect or improve the basic livability or utility of the property.” That description encompasses a wide range of work, from roofing to siding to windows, including DIY projects.
If the loan is $7,500 or under, no collateral is needed from the borrower. Above that, and you’ll need to secure the loan with your home, meaning you could lose your home if you can’t keep up with repayments.
Search for qualified lenders on the HUD website.
Home Equity Conversion Mortgage (HECM) for Seniors
- The only reverse mortgage insured by the federal government
- Homeowners over 62 can draw on equity for maintenance and repairs
- Premiums and fees apply but can often be paid with the proceeds of the loan
If you are over 62 and own enough equity in your home, you can apply for an HECM reverse mortgage. This allows you to “withdraw a portion of your home’s equity to use for home maintenance, repairs, or general living expenses.” The amount you can withdraw depends on the current interest rate.
The funds, plus all accumulated interest, must be paid back once the borrower leaves the home. This might leave your heirs in a spot where they have to sell the home to pay off the debt.
Step one is to meet with an HECM counselor to discuss all implications of the program.
USDA loans and grants
The United States Department of Agriculture offers loans and grants intended to aid low-income, rural homeowners.
Section 504
- Funds for low-income homeowners
- Interest rate fixed at 1%, $0 down, payback period of 20 years
- Grants, which don’t need to be repaid, are available to those 62 and older
The United States Department of Agriculture Single Family Housing Repair Loans and Grants Program (aka Section 504) offers funds for rural homeowners of low-to-moderate income. “Rural” can apply to “small towns, suburbs and exurbs of major U.S. cities.” (Check your property’s eligibility here.)
Loans of up to $40,000 are available at a fixed 1% interest rate, with a 20-year payback period. For homeowners over 62, grants may be available up to $10,000. A loan and a grant may be combinable for a total of $50,000.
Like a Title I loan, if the loan is $7,500 or under, no collateral is needed.
Begin your application by selecting your state here.
VA programs
The Department of Veterans Affairs (VA) offers programs to help veterans buy, renovate, or improve accessibility for a home. Applicants must present a Certificate of Eligibility (COE) to establish service history.
VA-backed loans
- Exclusively for veterans
- No down payment or mortgage insurance required
- Backed by VA, resulting in competitive interest rates
VA Renovation Loan
Like the FHA loan above, a VA Renovation Loan provides money to buy a home plus additional funding to rehab it. “A VA renovation loan allows the Veteran to close on the home even if the property doesn’t meet VA’s minimum property requirements,” according to Marion Cornelius Pierce, Public Affairs Specialist with the U.S. Department of Veterans Affairs.
If you already own a home, this loan would function as a cash-out refinance, where your current mortgage would be paid off with the new loan and the excess funds would be disbursed to the contractor upon completion.
VA Cash-Out Refinance
VA also offers regular cash-out refinances. The same requirements apply, but since you’re already occupying the home, Pierce explains, “the home would have to meet VA’s minimum property requirements at the time of closing.”
Both of these VA loan options require you to use a VA-registered home appraiser and contractors.
Start with an online search of VA-approved lenders in your area.
VA disability grants
- Exclusively for veterans with service-connected disabilities
- Money must be used to make the home more accessible
- Grants do not need to be paid back
SAH and SHA
SAH (Specially Adapted Housing) and SHA (Special Home Adaptation) are grants to buy, build, or alter a permanent home to accommodate a veteran with one or more of a specific list of service-related disabilities.
SAH grants are for up to $117,014 (in 2024), and there are only 120 available per year. The veteran must own the home, and the amount of the grant cannot exceed 50% of its cost.
SHA grants are smaller, up to $23,444 (in 2024) toward the “appraised market value of necessary adapted features.” The veteran — or a family member — must own the home.
Begin the application process here.
Home Improvement/Structural Alterations (HISA) Grants
HISA grants are specifically intended to make “medically necessary improvements and structural alterations” to a veteran or servicemember’s primary residence. Think accessible entrances, bathrooms, and kitchens; not jacuzzis, decks, or spas.
The accommodations must address service-connected disabilities, and even non-service-connected disabilities if they are in conjunction with service-connected ones.
Begin the application process here.
Native American Housing Improvement Program (HIP)
- Exclusively for Native American tribe members
- Annual income cannot exceed poverty level by more than 150%
- Grants can be used for repairs and renovations
The Bureau of Indian Affairs runs this program to “enhance the quality of life of qualified individuals by addressing substandard housing…for members of federally recognized Tribes.”
The tribe member must own housing categorized as “substandard” and must have an annual income of 150% or less of the Department of Health and Human Services poverty income guidelines.
There are two categories of aid:
- interim improvements of up to $7,500 to repair “health and safety threatening conditions”
- repairs and renovations of up to $60,000 to bring a house up to code
If you don’t qualify for any of these government-issued options, or if none of them suits your needs, you can explore other financing opportunities. You may be able to tap into your home equity or apply for a personal loan to pay for your planned home improvements. Here’s an overview of those options.
Home Equity Options
- Can improve your home using the value it’s already accrued
- Loan is secured with your mortgage, so interest rates may be lower
- Your home is collateral, which can result in loss of the home if you can’t make payments
If you have enough equity in your home, you can tap into it in the form of a new mortgage, generally in the amount of around 85% of the equity you own. You can use this to make any improvements you’d like. Be prepared for appraisal fees, origination fees, and any other expenses you’d expect from a mortgage process.
Important
Home Equity Loan
This results in a second mortgage in one lump sum.
Home Equity Line of Credit
Instead of a lump sum, this gets you access to an amount of cash from which you can borrow as much or as little as you need. This allows flexibility if your expenses change from your initial plan.
Cash-Out Refinance
Instead of a second mortgage, this is a brand-new mortgage that pays for the remainder of your existing mortgage plus the extra cash you want to make your renovations. If current interest rates and your remaining balance are low enough, the new mortgage can result in lower payments than you’re currently making on your mortgage.
Personal Loans
- For unsecured loans, no collateral needed
- Freedom to use the funds on any type of home improvements
- Options are available for lower credit scores
Personal loans from your bank or other private lenders, or through Acorn Finance, give you the freedom to use the funds for any home improvement you like. Not securing the loan with your home as collateral will result in higher interest rates, but you won’t be in danger of losing your home if you fall behind in payments.
The Acorn Finance Advantage
Financing a home improvement project can be overwhelming, especially if you have an urgent renovation or repair need. Acorn Finance can streamline your search. Enter your needs online, and you can see a selection of loans you’re pre-qualified for in just minutes.
If you have bad credit, Acorn Finance presents credit monitoring and credit-building offers through its platform.
Comparing options on Acorn Finance? See if you prequalify for a personal loan without impacting your credit score.
Just answer a few questions to get personalized rate estimates from multiple lenders.