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How to pay for home improvements with government grants

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If your home needs repairs to remove health or safety hazards, you might look into government-sponsored home improvement grants, also called home repair grants. Not everyone qualifies for these grants, and most have strict criteria that possible recipients must meet. However, if you do qualify they are a great source of financing for your home improvement project.

What is a grant?

A grant is a form of financial aid that the recipient does not have to repay. For those who qualify, grants may be issued by federal, state, and local governments.

Since tax revenues fund government grants, they frequently have strict rules and auditing procedures. Many grants are competitive; even if you qualify for a grant, you may not necessarily receive it. You should apply for the grant as soon as possible.

Where can you apply for home improvement grants?

Find money to improve your home by contacting your local Housing and Urban Development (HUD) office or visiting its website. HUD can let you know what grants are available in your area.

The National Residential Improvement Association (NRIA) can also help you find grants to help pay for your home repairs. You have to fill out a questionnaire to see what types of financial aid you qualify for.

Who is eligible for home improvement grants?

The Rural Development arm of the U.S. Department of Agriculture (USDA) offers home improvement grants to individuals who meet the following criteria:

  • Own and occupy the home
  • Unable to procure approval for affordable credit from other sources
  • Meet income limitations
  • At least 62 years old

The USDA awards a lifetime maximum of $7,500 to eligible homeowners. But there are limitations on the usage of the grant money. You cannot pay for cosmetic home improvements with grant money; instead, you must use the funds to repair health and safety hazards or make the home more handicap-accessible.

HUD also offers grants through its HOME Investment Partnerships Program for low-income people. In addition to handicap-accessibililty, HOME grants cover improvements that protect against weather or emergency repairs. HUD distinguishes between “hard costs” like material and structural improvements and “soft costs” like legal and banking fees. The organization may even offer a grant to pay for increased interest payments when a borrower takes out a home repair loan along with his mortgage.

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Types of home improvement grants

  • The Home Investment Partnerships Program – this program helps state and local governments create affordable housing options.
  • Section 504 Home Repair Program – this program helps low-income and elderly homeowners cover the cost of repairing or modernizing their single-family home
  • Native American Housing Improvement Program – this program offers up to $60,000 for repairs or renovations to help improve properties and bring them up to code
  • Area Agency On Aging – this program administered through the states helps senior citizens improve their properties to make them more livable for the elderly.
  • VA Specially Adapted Housing Grant – this program funds changes to a home to make them habitable for veterans with service-related disabilities
  • Temporary Residence Adaptation Grant – This program helps cover the cost for renovations for family members who are currently housing a veteran or service member

What other forms of financial assistance are available to homeowners?

If you’re not eligible for a home repair grant but still can’t afford to make the repair on your own, there are other options to make home repairs more affordable.

Low-cost loans: Some organizations, such as the USDA and HUD, also offer affordable loans to lower-income homeowners. Though you have to repay the loan, the interest rate tends to be extremely affordable.

Tax credits: Tax deductions can be used in home improvement costs as a credit against taxes when you sell your home or if you work from your home and made repairs to your home office. However, they are not normally deductible as personal expenses.

Cash-out refinance: A cash-out refinance lets you turn some of your home equity into cash that you can use for other purposes, including home improvements. In some cases, the interest on these loans is tax-deductible if used for home improvement. Another perk is that cash-out refinance rates are usually lower than rates for other types of loans. Just keep in mind that you’ll be increasing your mortgage balance and potentially the length of time until you pay off your home.

Bottom line

Home improvements can be expensive, but there are many grant programs available that can help you keep your home in good shape or renovate it to meet new needs.

If you can’t find a grant program that applies to you, don’t lose hope. Other options, like cash-out refinancing or taking advantage of tax credits can help make home improvements affordable.