How Can People With Low Income Qualify for a Mortgage?

Various programs exist to help low-income home buyers purchase a home.

Various programs exist to help low-income home buyers purchase a home.

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.

FHA-Insured Loans

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.

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About the Author

Chris Blank is an independent writer and research consultant with more than 20 years' experience. Blank specializes in social policy analysis, current events, popular culture and travel. His work has appeared both online and in print publications. He holds a Master of Arts in sociology and a Juris Doctor.

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