To help you get started on your quest to become a homeowner despite income, credit, or savings issues, have a look at these frequently asked questions and answers.
1. Can I buy a home with help from the government?
You may know that the government can help you with rent assistance via Section 8 and other programs. But it can also help you with buying a home.
There are several ways to buy an affordable home with help from the government. If you feel like a lack of savings is holding you back, you can apply for down payment assistance (DPA). This results in an average of $12,000 towards the purchase of homes.
Get down payment assistance via a grant, and you won’t have to pay it back. Get it through a loan, and you’ll be able to make payments with low interest.
Besides down payment assistance, you can also get home buying help from the government through USDA or FHA loans. The government backs these mortgages, which allows for applicants to qualify for them despite lower credit scores, low income, and a lack of down payment.
2. What are some examples of home buying programs for people with low income?
Should you not qualify for a traditional mortgage, don’t fret. Here is just a handful of low-income home buying programs that can save the day:
- USDA loans – To help you buy an affordable house outside of the city.
- FHA loans – Low down payments and accepting of low income and low credit scores.
- HomeReady loans – Let you buy a home with low income and a small three percent down payment from Fannie Mae.
- Home Possible loans – Another option for low-income purchasers with small down payments from Freddie Mac.
- VA loans – If you’re a member of the armed services or a veteran, you can get loans here with zero money down.
3. What does it take to qualify for a low-income home loan?
Each mortgage program has its requirements. If you feel as if you won’t get approved for a loan, you could take on a co-borrower to boost your qualifying income. Otherwise, here are some examples of what to expect from different programs:
- USDA – Make between 50-80 percent of the Area Median Income.
- FHA – 580 credit score, 45 percent debt-to-income ratio. Put 10 percent down, and you could qualify with a credit score as low as 500.
- VA – Be a veteran or service member.
4. What’s a good loan program for a first-time, low-income homebuyer?
You can get a big jump on the process by getting down payment assistance. You can also try some of the aforementioned low-income loan programs like USDA, FHA, VA, HomeReady, or Home Possible.
5. Do you need proof of income to buy a home?
The carefree days of buying a home without proof of income are now over. If you don’t want to submit a W2 or use traditional proofs of income, however, you can use bank statements, retirement accounts, or assets to achieve that goal.
If proof of income is a significant issue, you may want to look into a bank statement loan.