How to Get a Federal Government Loan for Home Improvement with Bad Credit

Several home improvement loans are available through the Housing and Urban Development department of the federal government. The PowerSaver Energy Efficiency Loan Pilot program is the most recent loan program. These home improvement loans provide eligible homeowners up to $25,000 for energy saving measures including a new heating and air conditioning unit. PowerSaver loans are only available to borrowers with a credit score of 660 or above. Other HUD programs such as Title I do not have strict credit guidelines.


Contact the Housing and Urban Development (HUD) office in your community. HUD is responsible for eligibility determination. Find your local HUD office by visiting HUD’s website (see “Resources”) or by calling (800) 767-7468. When calling, request item number 2651, "Fixing Up your Home and How to Finance It,” for more information.

Step 2:

Research eligible lenders for the federal loan program. Through your local HUD, review a list of participating lenders for the federal loan program. The federal government guarantees 90 percent of the loan but private lenders still administer the loans.

Step 3:

Complete the loan paperwork. Having bad credit won’t necessarily rule out your application for some of the federal loan programs. Depending on your credit score, you might need a co-signer for the loan.

Step 4:

Apply for a private loan. If you are denied for a federal loan because of your credit, you can always apply for a private loan at a higher interest rate. Although this might not be ideal, it can still help you purchase a new heating or AC unit.

Step 5:

Work on repairing your credit. With bad credit, federal loans will be more difficult to obtain. Review your credit report and dispute any discrepancies that are listed. Pay off any loans or outstanding balances.

Step 6:

Include the cost of the AC and heat system in your taxes. Any energy efficient product is eligible for a tax credit of 10 percent of the cost up to $500.


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