Alert: The 8 New Factors On How To Buy A House With Low Income In 2017 to 2018
Buy A House With Low Income: Not Easy, But Possible
When you buy a house with low income, you face several obstacles. The eight new factors on how to buy a house with low income. NSH Mortgage has the wisdom and tools that can help you when buying a house with your low income.
It is not easy to save a down payment while you are renting. Additionally, when you earn less, it becomes more difficult to keep your bills paid on time and your credit pristine. In addition, lower income makes it harder to keep your debt to income ratio (DTI) low enough to qualify for a home loan.
Mortgage Programs For People With Low Income
Many of the best mortgage programs are only available to home buyers with low or moderate income. Here are a few solutions to your questions for, “How to buy a home with low income and with good credit?”
These low income home loans offer one or more benefits, including:
- Below market interest rates and payments.
- Discounts on mortgage insurance.
- Low down payment requirements.
- Down payment assistance grants and loans.
Most of these programs require you to complete some form of approved home buyer education, especially if you are a first-timer. Furthermore, all of them require you to live in the home, no vacation homes or rentals allowed. Lenders also offer government backed programs that are not restricted by income, but their features are helpful for home buyers who earn less.
HomeReady And Home Possible Advantage
Fannie Mae’s HomeReady program and the Home Possible Advantage loan from Freddie Mac feature low down payment requirements. You only need three percent of the home’s purchase price, and that can be a gift, grant or loan from an acceptable source. In addition, mortgage insurance for these low income home loans are discounted.
With three percent down, standard mortgage insurance for a buyer with a 720 FICO score is .95% per year. With these special programs, though, you might pay just .65% to .77%. There is no minimum required contribution from the borrower.
Even better, the home seller is allowed to pay closing costs of up to three percent of the purchase price. Instead of negotiating a lower sales price, try asking the seller to cover your closing costs.
USDA Rural Housing Mortgages
If you are not buying within city limits, you may qualify for a USDA home loan. This program was created to help borrowers with low to moderate income when buying homes in rural areas. About 40% of the US population lives within designated rural areas. With a USDA home loan, you can buy a home with no money down and 100% financing.
There are two type of USDA loans, the Guaranteed Program for those with incomes that do not exceed 115% of the Area Median Income (AMI). In addition, the Direct Program which is for those with incomes between 50% and 80% of the AMI. USDA approved mortgage lenders make the Guaranteed loans, while the government funds Direct loans without involving private lenders at all.
VA Home Loans
The VA mortgage for military home buyers is not specifically for low income applicants, but it is helpful for several reasons. First, there is no minimum credit score under the program, although lenders can add their own minimums if they want to. Second, there is no down payment requirement. You can finance 100% of the purchase price.
Third, there is no mortgage insurance. The VA Funding Fee can be wrapped into the loan amount. Finally, VA mortgages allow sellers to pay up to four percent of the purchase price in closing costs. So you can get into a home with nothing out of pocket.
Good Neighbor Next Door
This program offers unique benefits for nurses, first responders and teachers. If you are eligible, you can buy HUD foreclosure homes at a 50% discount. Use a FHA mortgage, and you only need $100 for a down payment.
If your offer is accepted, and you qualify for financing, you get the home. The 50% discount makes it a lot more affordable. The discount is actually a second mortgage. This second mortgage, though, has no interest and requires no payments. Live in the home for three years, and the second mortgage is ended.
Manufactured And Mobile Homes
Manufactured housing is some of the most affordable around. Homes on approved foundations and taxed as real estate can be financed with many mainstream mortgage programs. Many programs require slightly higher down payments or more restrictive terms for manufactured homes.
HomeReady, for example, increases the minimum down payment from three percent to five percent if you finance a manufactured home. Mobile homes that are not classified as real estate can be purchased with personal loans like FHA’s Title 2 Program. These are not mortgages, because the homes are not considered real estate.
Mortgage Credit Certificates (MCCs)
This program allows you to stretch your home buying power. If you meet income eligibility guidelines, you get a tax credit equal to some percentage of your mortgage interest. Lenders are allowed to add this credit to your qualifying income when they underwrite your mortgage.
This allows you to qualify for a higher mortgage amount than you otherwise could. Mortgage credit certificates are issued by many: states, counties, cities. In fact, their rules and amounts vary widely.
Down Payment Assistance (DPA)
Down payment assistance may be offered by charities, government agencies, employers and other sources. It usually takes the form of a grant or loan. Most programs impose some form of income limits on recipients.
Some, however, provide assistance to people who buy in underserved or redevelopment areas regardless of income. Average down payment assistance is about $12,000. Surprisingly, many who qualify for DPA never apply for it, because they do not know it exists.
If You Do Not Ask, You Will Not Get
Now you understand these programs, so ask your local real estate agents or housing authority about these programs and find out if they can be apply to you. It is possible for people to purchase a home with low incomes and still pay nothing out of pocket. Between down payment assistance, concessions from sellers, or other programs like Community Seconds, you can buy a home with no money, while your income and credit fall within the program guidelines.