Best Low Income Home Loan Options • Benzinga

How much money do you need to buy a house? While this is a question many potential buyers ask, the sad truth is that there is no set dollar amount you need to earn to buy a home. If you live on a budget and assume you don’t earn enough to qualify for a mortgage, read on – you might be surprised to learn how many options there are for low-income buyers.

The best home loan options for low-income people

Government-backed mortgages have been developed to help low-income buyers buy their first home. Government-backed mortgages come with insurance from a branch of the federal government, making them less risky for lenders. Government-backed mortgages and the following additional loan products can help you buy a home without earning triple your monthly mortgage payment.

FHA Loans

FHA Loans are backed by insurance from the Federal Housing Administration. These loans were created to help buyers with lesser credit histories or previous credit errors to buy a home. The FHA loan program does not set a minimum income level that you must meet to qualify for a loan, which means you can potentially be approved with less money coming in. However, you will need to meet the following criteria:

  • A FICO credit score of at least 580
  • Proof of stable, consistent, and continuous income using a W-2 or other tax document
  • A down payment of at least 3.5% of the purchase price of your new home
  • A debt to income ratio (DTI) of 50% or less
  • Buying a home that is habitable when you move in
  • Use of the house as a principal residence

Some FHA lenders also allow you to buy a home with an FHA loan and a credit score as low as 500. However, if your score is below 580, you will need at least 10% to close your loan.

Fannie Mae HomeReady Loans

Fannie Mae is a federal mortgage agency that launched the HomeReady program in 2015 to give low-income buyers a more flexible option for financing their first home. The HomeReady program makes it easier to obtain a mortgage when you have low incomes because the loan application allows you to add non-borrowing cohabitants to the loan. By adding co-borrowers who live in your home to your loan application, the HomeReady plan gives you a more flexible way to qualify if you have a lower income on your own, but live with others who contribute to household expenses.

To qualify for a mortgage under the HomeReady program, you must meet the following criteria:

  • Have a debt to income ratio not exceeding 50%
  • Move into the house you are buying as your primary residence
  • Take a four to six hour online homeownership course
  • Have a credit score of at least 620 points

The HomeReady program was designed for low-income buyers. You cannot earn more than 80% of your census tract’s median income. Verify that your income qualifies you for a loan based on your location using the Census calculator before applying. Simply click on your county to see the maximum income you can earn while qualifying for a HomeReady loan.

USDA Loans

If you are looking to buy a home in a rural area, you may want to consider applying for a USDA loan. USDA loans are insured by the United States Department of Agriculture and can be used to purchase a home in a suburban or rural part of the country. Use USDA evaluation board to determine if the home you want to buy is in an eligible area. If so, you may qualify for a mortgage with $0 down.

To qualify for a USDA loan, you must meet the following criteria:

  • The house you buy must be in livable condition, that is, it must have working utilities, water, and a solid structure.
  • Your household income must be USDA compliant limitations for your region
  • A credit score of 640 or higher (although the exact requirement may vary by lender)
  • A DTI ratio of 43% or less

How to Prepare for a Low Income Mortgage

As you can see, there are many options you can use to buy a home if you have a lower income. However, it’s important to remember that low-income buyers are still viewed by lenders as higher risk candidates for mortgages. Take the following steps to prepare your mortgage application to maximize your chances of success.

  • Improve your credit score: Although it is possible to qualify for a mortgage using an FHA loan with a score as low as 500, you will generally need a credit score of at least 580 to buy a home. Before applying for a home loan, check your FICO credit score to make sure it measures up. If your score is below what you need, work on credit by making at least the minimum payment on all your accounts before applying. You can also work to reduce your balances and avoid adding extra charges to your credit accounts when you prepare to apply for a mortgage.
  • Check your credit report: If you always make your payments on time and your score is always low, you may want to remove your credit report. Your credit report lists both negative and positive credit items that contribute to your score, so you’ll see exactly what factors come into play and cause your score to escalate. If you notice something you don’t recognize, dispute it with the reporting agency. By law, if the credit reporting agency cannot produce proof of the errant item, they must remove it from your credit report.
  • Save more for a down payment: When you have a lower income, it can be harder to save money for a down payment. Taking the time to assess your current savings plan and locate areas where you can put more money aside can help you find approval easier. You can also consider looking for options like USDA and VA loans, which allow you to buy a home with $0 down. Bringing a larger down payment makes you a less risky candidate for a loan, which means you can enjoy easier qualification by prepaying a higher percentage of your home.

How long does it take to complete a mortgage?

Typically, you can expect a mortgage to take between 30 and 50 days to close. While this may seem long, remember that this figure includes the entire closing time from the date you submit an offer to purchase the home you are considering until the date you get your keys. The longest part of the mortgage process is usually the underwriting, which takes between one and two weeks.

You can take steps to speed up the mortgage process. Stay as proactive and responsive as possible during the application process and be sure to respond to questions and requests for documents as quickly as possible. Check your loan application before submitting it to ensure that all information is correct to reduce waiting time during subscription.

Compare mortgage lenders

If you are in the early stages of building a new career or will have a lower income for the foreseeable future, you may still qualify for a mortgage. Benzinga offers information and advice on the following mortgage services. Consider starting your search for the right low-income home loan by using some of the links in the table below.

Frequently Asked Questions

questions and answers


What is a low income borrower?


A low-income borrower is a loan applicant whose household income level is below the median 80% income threshold for the area where the home is located. Being a low-income borrower doesn’t necessarily prevent you from qualifying for a mortgage, especially if you don’t have other debts beyond your housing payment.


What is the lowest income to qualify for a mortgage?


There is no real minimum income to qualify for a mortgage. Instead of just looking at the amount of money you earn, lenders consider your income relative to the amount of debt you have and the price of the house you want to buy. If you’re worried about how your income level will impact your home purchase, you can allocate some of your income to paying off your debts before you apply to improve your chances of qualifying.