If you are tired of renting but are having trouble getting a mortgage because of your low income. You’re not alone and thankfully there is hope. There are 6 different types of low-income home loans designed to help homebuyers with low-to-moderate income families.
FHA Loans
A long time ago home loans were only for people with great credit, high-income, and a large downpayment. The Federal Housing Administration was created in 1934 to encourage homeownership in America.
Some of the greatest benefits of FHA home loans is they come with only a 3.5% down payment, people with poor credit can qualify, and people with low income can qualify.
The FHA doesn’t actually make the loan, but it insures it – as long as the loan meets its specific standards. When a bank underwrites a loan that meets those standards, then, it has a guarantee of protection against loss.
USDA Loans
This program, formally known as Section 502, is now commonly called a Rural Housing Loan. This low-income housing loan is meant to reach “low-to-moderate-income homebuyers,” and that includes people living in suburban and small-towns as well.
USDA rural development loans are specifically for low-to-medium income families. In order to qualify your household income cannot be more than 115% of the average area median income.
The typical maximum household income is $73,600, and up to $103,400 in a high cost rural area of the U.S. There is no maximum DTI ratio either.
FHA 203K Home Renovation Loan
An FHA 203k mortgage is a type of home rehab loan that gives you one loan to buy a property and borrow money to make repairs and renovations. You just need a 3.5% down payment and you can borrow additional funds with a streamline loan, unlimited cash for a standard 203K.
The loan requirements are similar to FHA, so low income families can qualify. However, since the lender is loaning the borrower more money than the purchase price you must have a good credit rating to qualify.
VA Loans
A VA loan is a no-money-down mortgage program available to members of the U.S. Military and surviving spouses. These loans have no maximum DTI requirements and do not require mortgage insurance. A VA home loan is the cheapest way to become a homeowner as a Veteran.
You don’t have to have perfect credit, even a bankruptcy isn’t an automatic disqualification. Since there is no maximum DTI requirement, lenders are able to push the DTI ratio much higher than traditional loans.
ReadyBuyer HomePath Mortgage
The HUD HomePath mortgage program by Fannie Mae is available from many lenders in the U.S., and represents a truly innovative approach to home underwriting.
It considers the income of everyone living in the house as part of the qualification process. This helps you by increasing your debt-to-income ratio using everyone in the household, without having to be on the mortgage. With the ReadyBuyer HomePath mortgage you can purchase any HUD home on the HUD HomesStore website with just 3% down payment. HomePath will also give you a 3% credit you can put towards closing costs after you attend a mandatory homebuyer education course.
The Conventional Loan 97
The Conventional 97 program was discontinued for a brief time in Dec. of 2013, then reinstated by the Federal Home Financing Agency in 2014. The Conventional Loan 97 offers a 3% down payment, might be just what you are looking for. It saves you 0.5% over the FHA loan and is offered by both Fannie Mae and Freddie Mac lenders.
As if that’s not good enough news, it gets better, this mortgage allows you to use gift money for the entire down payment, as long as the gift-giver is related to you. This means by blood, marriage, legal guardianship, domestic partnership, or even an engagement.
