Can You Get a Home Loan on Disability?

Your disability does not disqualify you from owning a home.

Your disability does not disqualify you from owning a home.

For individuals who rely on disability income programs, securing a home loan doesn't have to be an uphill battle. Although some disability may inherently limit the ability of an individual to generate the type of income required to qualify for a conventional mortgage loan via a private lender, there are other lending options available. The Federal Housing Administration provides a number of powerful lending opportunities for individuals who may otherwise be unable to secure the funds they need to take the next step on the path towards homeownership. This opportunity in addition to Fannie Mae disability income loans are vital.

Tip

Individuals receiving disability have no shortage of options when it comes to securing home financing. The FHA and Fannie Mae provide generous disability income mortgage qualification standards for applicants.

FHA Loan Basics

Although FHA loans are not specifically tailored to disabled adults, they are a popular lending platform for those who may not fit the profile of traditional mortgage borrowing. While conventional private mortgage loans prefer a 20 percent down payment, FHA loans can be secured with as little as 3.5 percent down. Depending upon the price of the home in question, this could make a significant difference for disabled homebuyers.

It is important to mention that FHA loans require applicants to pay an upfront mortgage insurance premium, typically equivalent to 1.75 percent of the property's purchase price. Additionally, borrowers will be required to pay a monthly insurance premium to complement their standard mortgage payment.

In the event that a disabled individual has sustained penalties to their credit score, FHA loans can still be of assistance. Individuals can secure the optimal down payment of 3.5 percent with a credit score of 580 and up. Individuals who have a credit score lower than 580 may still qualify, although they will be required to make a larger down payment at the initiation of the loan.

More Information About FHA Loans

Those who have never explored FHA loans may be surprised to realize that the program itself does not lend money to applicants. Instead, the FHA collaborates with private lenders to back loans for qualified applicants. Therefore, the applicant seeking FHA assistance will still be required to collaborate with a private lender in order to complete the lending application, albeit with revised FHA standards. Ultimately, FHA loans have become one of the most powerful resources for home applicants who have experienced a degree of financial hardship for one reason or another.

Fannie Mae Disability Income Programs

The HomeReady program created by Fannie Mae provides low-income individuals with the opportunity to secure home financing on generous terms. Much like FHA loans, the HomeReady program offers a less restrictive path into homeownership compared to private conventional loans.

As could be imagined, this type of lending opportunity is particularly valuable for individuals who may be relying on disability income. HomeReady does not prohibit disability income from being used to fund mortgage borrowing. Therefore, this program should be considered a priority when reviewing possible borrowing options for the future.

Fannie Mae's borrowing terms are competitive compared to FHA loans. That being said, one important distinction between the HomeReady program and FHA loan assistance is the credit score threshold. The HomeReady program is primarily intended for applicants whose credit score is above 620, a 40 point increase over current FHA standards.

Other House Loans for Disabled Adults

In addition to the FHA and Fannie Mae borrowing platforms, programs such as the Section 8 Homeownership Voucher Program and Veterans Affairs home loans also offer valuable assistance to disabled homebuyers.

The Section 8 Homeownership Voucher Program is overseen by the U.S. Department of Housing and Urban Development. After acquiring a valid voucher from a participating Public Housing Authority, qualifying individuals will only be required to pay up to 30 percent of their adjusted monthly income toward their housing. This applies both to mortgages as well as mortgage insurance, utility bills and more.

The VA provides additional assistance to wounded soldiers as a supplement to the fundamental benefits they already receive thanks to their years of service. As an example, the VA allows service members who have been disabled to bypass service length requirements typically attached to VA home loan eligibility. Specific grants may also be available to help enhance in-home accessibility features for disabled veterans.

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About the Author

Ryan Cockerham is a nationally recognized author specializing in all things innovation, business and creativity. His work has served the business, nonprofit and political community.

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