For many American individuals and couples, owning a home represents the ultimate dream. However, for people with low incomes, the dream may seem out of reach because they don't believe they can qualify for a mortgage. However, there are programs available to assist low-income buyers achieve the dream of home ownership.
The Department of Housing and Urban Development offers home loan assistance through the Federal Housing Administration. FHA provides loan guarantees to low- and moderate-income people who hope to become homeowners. Potential home buyers who have credit scores of at least 580 qualify for FHA-guaranteed loans that require a down payment of only 3.5 percent. People with lower scores may also qualify for FHA loans, but they must must make a down payment of at least 10 percent.
VA and Navy Federal Loans
Veterans Affairs and the Navy Federal Credit Union offer low-interest mortgages for primary homes to veterans of the armed services as well as some civilian employees. In some cases, spouses and widows or widowers of veterans who died from service-related causes may also qualify for VA loans, while other family members who belong to the credit union may qualify for loans through Navy Federal. These loans have relaxed credit standards and are available to eligible borrowers of nearly all income levels -- and require no down payment.
USDA Rural Development Loans
If you're a potential home buyer who is interested in purchasing a home in specific regions of the country, you may receive assistance from the Department of Agriculture Rural Development Loans program. The loan program is designed to allow low- and moderate-income people to purchase homes in eligible areas. The name is somewhat misleading; loans are not limited to rural areas. One eligible region for USDA Rural Development Loans is the Flint, Michigan, area. Eligibility is generally limited to first-time home buyers, with limited exceptions.
Although these loan programs generally have relaxed income requirements -- or are specifically geared toward low-income buyers -- buyers must often have at least fair credit to qualify. Another requirement for FHA loans, but not for VA or Navy Federal loans, is private mortgage insurance. PMI is often required when buyers post less than the conventional 20 percent down payment toward the purchase of their homes. Home buyers with low credit scores customarily are expected to pay hefty PMI rates. Maintaining low debt-to-income levels also enhances the probability for low-income home buyers to qualify for a mortgage. However, doing so may limit the price range of homes for which home buyers may qualify for a mortgage.
- USDA Rural Development: Housing and Community Assistance Housing And Community Assistance Housing and Community Facilities Programs
- Bankrate.com: Can Bad Credit Sink Your Mortgage?
- Bankrate.com: What Is Mortgage Insurance?
- Bankrate.com: VA Loans Offer Good Deals
- Bankrate.com: Four Mortgages That Require Little Money Down
- Bankrate.com: Low Credit Scores Mean High PMI Rates
- FHA Home Loans: FHA Loans --Income Qualifications
- FHA.com: FHA Requirements -- Debt Ratios
- FHA.com: FHA Requirements -- Mortgage Insurance
- FHA.com: The Facts About FHA Credit Requirements
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