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How can I buy a house if I don't make a lot of money?

Let's take a look at some of these programs that aim to help those with low incomes or low credit scores get into a home. USDA Mortgages. ... VA Mortgages. ... FHA Loans. ... HUD Homes. ... Homeownership Voucher Program. ... Good Neighbor Next Door. ... State Or Local Assistance.

rocketmortgage.com - How To Buy A House With Low Income | Rocket Mortgage

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Let’s take a look at some of these programs that aim to help those with low incomes or low credit scores get into a home.

USDA Mortgages

The United States Department of Agriculture (USDA) runs a loan program that offers mortgages to low- to moderate-income households in rural areas. The program is called the Single Family Housing Guaranteed Loan Program. Through this program, the USDA backs mortgages offered by participating lenders. This government backing allows these lenders to offer 100% financing, meaning that these loans don’t require you to put any money down. Because saving up for a down payment is often the biggest hurdle for hopeful home buyers, especially those with lower incomes, USDA loans can help those who qualify get into a home that they otherwise wouldn’t be able to afford. How do you qualify for a USDA loan? In addition to meeting credit requirements (typically a 640 credit score and a DTI below 41%), you’ll also need to live in an eligible rural area and meet income requirements. To meet income eligibility requirements, your combined household income can’t exceed 115% of your area’s median household income. For location eligibility, you can check out the USDA’s website. You may be surprised to find that in addition to rural areas, many suburban areas are also eligible for USDA financing.

At this time, Rocket Mortgage® doesn’t offer USDA loans.

VA Mortgages

If you’re eligible for a VA mortgage, this is another great (typically) 0% down option that can help low-income borrowers get into a home. VA loans are backed by the Department of Veterans Affairs, similar to how the USDA backs USDA loans. These loans are guaranteed by a government agency (in this case, the VA) so that lenders can offer better terms, such as low or no down payments and lower interest rates, to borrowers who might be considered risky by conventional loan standards. VA loans are available to those who have served or are currently serving in the military. This includes veterans, active-duty service members, National Guard members and Reserve members who meet minimum service requirements. Certain surviving spouses may also be eligible to get a VA loan. VA loans offer a variety of great benefits to those who are eligible, including lower interest rates, no required down payment, no mortgage insurance and more lenient credit and DTI requirements.

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FHA Loans

One more popular option among government-backed mortgages is the FHA loan. These loans are guaranteed by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD). These loans have more lenient requirements that can help low-income borrowers - such as college students - or those with poor credit histories. They have lower credit score requirements, low down payment requirements and, potentially, low closing costs. With an FHA loan, it’s possible to put down as little as 3.5% on your home purchase, even with a credit score as low as 580.

HUD Homes

When a home purchased with an FHA mortgage is foreclosed on, HUD will attempt to recoup some of its losses by auctioning off the home as a HUD Home. These homes are typically sold below market value, making them an attractive option for those with less buying power. However, HUD Homes, like other types of foreclosures, are sold “as-is,” which means that no repairs will be completed prior to the sale. If you purchase a cheap HUD Home that ends up needing lots of repairs and updates, you risk spending more money than you would have if you’d just purchased a home on the regular market. If you’re interested in purchasing a HUD Home, it’s vital to get a home inspection and consider whether you can afford any repairs the property may need. You can find HUD Homes for sale in your state on the HUD Home Store website.

Homeownership Voucher Program

The housing choice voucher program (sometimes referred to as Section 8), which provides rental assistance to very low-income families, has a program that allows these same families to use their vouchers to purchase and own their own homes. This program is called the Housing Choice Voucher homeownership program. Housing voucher programs are administered by local public housing agencies, and not every local agency offers the homeownership option as part of their program. If you’re interested in using your housing voucher to pursue homeownership, be sure to check with your area’s public housing agency. If your local agency does offer this program, you’ll need to meet income requirements. Those who aren’t elderly or disabled will need to meet employment requirements. You’ll also need to be a first-time home buyer and complete a homeownership counseling program, in addition to any requirements set by your public housing agency.

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Remember how on government-backed loans various government agencies guarantee certain loans offered by lenders? Fannie Mae and Freddie Mac play a similar role in the lending of conventional (nongovernment-backed) loans. For low-income borrowers, regular conventional loans can sometimes be harder to qualify for, especially if you’re having a hard time saving up for a down payment. HomeReadyⓇ and Home PossibleⓇ loans allow buyers to finance up to 97% of their home purchase, meaning borrowers can make down payments as low as 3%. Though there are some differences between these two programs, they both have similar requirements, including that borrowers make no more than 80% of the median income for their area and take a homeownership education course prior to purchasing. However, inventory tends to be very limited; at the time of publishing, only a few states had homes available. You can check out available listings on the HUD Home Store website. If you find a home you’re interested in, keep in mind that you’ll need to meet the program’s specific requirements for your profession, and you’ll have to live in the home for at least 3 years.

State Or Local Assistance

If you’re unable to buy a home without a little bit of help, it’s always a good idea to check out what assistance your state or local government offers hopeful homeowners. Local charities or nonprofits may have support available as well. Some state or local housing agencies may offer down payment assistance, sometimes in the form of grants or forgivable loans. You should also look into your state’s mortgage credit certificate program, which gives homeowners a tax credit for interest paid on their mortgage.

rocketmortgage.com - How To Buy A House With Low Income | Rocket Mortgage

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