How to Buy a House with Low Income: Tips and Assistance Programs (2024)

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  • There's no minimum income you need to buy a home, but your debt-to-income ratio can limit how large of a mortgage you'll be approved for.
  • Low-income borrowers should look for mortgages that allow low or no down payments.
  • Your state's housing finance agency might have programs specifically geared toward low-income homebuyers.

Over the past couple of years, homeownership has become increasingly unaffordable. Home prices increased nearly 30% from 2020 to the end of 2023, and mortgage rates are now nearing 7%. As both prices and rates continue to rise, many hopeful buyers are wondering: Can I actually afford to buy a home on my income?

While there's no formal income limit required to buy a home, mortgage lenders typically limit the amount of debt you can take on relative to your income. Because of this, low-income individuals often struggle to qualify for a mortgage.

"When it comes to real estate, low-income homebuyers face a number of challenges," says Boyd Rudy, owner of MiReloTeam. "Not only do they often have difficulty securing financing, but they also may have limited resources for making a down payment and covering other associated costs."

While it can be challenging, there are a variety of home loans and other programs specifically geared toward low-income individuals that offer lower costs, better rates, and things like down-payment assistance that can make homeownership more affordable for those who qualify.

Understanding your financial situation

Knowing what you have to work with is the first step toward buying a house — no matter what your income may be.

Assessing your income and expenses

To start, look at your income in relation to your expenses. Are you covering everything comfortably? Do you have room to spend more on your mortgage payment than you're currently paying on rent, or do you need to stick around the same range?

You should also take this time to assess your expenses. Are there any items you can cut back on? This can give you more wiggle room as you approach your home purchase.

Setting a realistic budget

Once you have an idea of your income and costs, you can set your homebuying budget. The easiest way to do this is using a mortgage calculator. Play around with the numbers until you get a monthly payment you're comfortable with. You can check Freddie Mac for a good idea of where current mortgage rates stand.

Exploring homebuyer assistance programs

Fortunately, if you're on a limited income, there are still options for buying a home — and without breaking the bank. These include both federal and state homebuyer assistance programs, as well as other options. See below for assistance you might qualify for:

Federal programs

There are plenty of federal programs that can help you get into a home more affordably. These include:

HUD homes

The US Department of Housing and Urban Development sells FHA-foreclosed homes on its HUD Homes website. To buy one of these homes, you'll need to work with a HUD-approved real estate broker, who will submit a bid on your behalf.

HUD Homes are listed at low prices, but they're sold as is. This means that the seller won't make any repairs prior to the sale. So if a home is in need of a lot of repairs, you could end up spending more in the long run than if you'd purchased a move-in-ready home on the regular market.

Good Neighbor Next Door program

The Good Neighbor Next Door program helps law enforcement officers, teachers, firefighters, and emergency medical technicians purchase a HUD Home at a 50% discount in eligible "revitalization areas."

However, not all HUD Homes are eligible for the Good Neighbor Next Door program, and inventory is usually extremely limited.

Section 8 homeownership voucher program

The Section 8 housing choice voucher program provides rental assistance to very low-income households. If you're a Section 8 participant, you may be eligible for its homeownership program.

With this program, you can use your housing choice voucher to purchase a home and receive monthly assistance. You can only participate in this program if your local public housing agency offers it, and not all agencies do.

State and local programs

To get help on a local level, you can reach out to your city or county's housing agency. You can find your local public housing agency using HUD's search tool. HUD can also help you find information specific to your state.

If you want to learn more about the programs available to you as a low-income homebuyer, you can also reach out to your state's housing finance agency. Here's where you can find help in every state, according to the National Council of State Housing Agencies.

StateHousing finance agency
AlabamaAlabama Housing Finance Authority
AlaskaAlaska Housing Finance Corporation
ArizonaArizona Department of Housing
ArkansasArkansas Development Finance Authority
CaliforniaCalifornia Housing Finance Agency
ColoradoColorado Housing and Finance Authority
ConnecticutConnecticut Housing Finance Authority
DelawareDelaware State Housing Authority
Washington, DCDistrict of Columbia Housing Finance Agency
FloridaFlorida Housing Finance Corporation
GeorgiaGeorgia Department of Community Affairs
HawaiiHawaii Housing Finance and Development Corporation
IdahoIdaho Housing and Finance Association
IllinoisIllinois Housing Development Authority
IndianaIndiana Housing and Community Development Authority
IowaIowa Finance Authority
KansasKansas Housing Resources Corporation
KentuckyKentucky Housing Corporation
LouisianaLouisiana Housing Corporation
MaineMaine State Housing Authority
MarylandMaryland Department of Housing and Community Development
MassachusettsMassHousing
MichiganMichigan State Housing Development Authority
MinnesotaMinnesota Housing
MississippiMississippi Home Corporation
MissouriMissouri Housing Development Commission
MontanaMontana Housing
NebraskaNebraska Investment Finance Authority
NevadaNevada Housing Division
New HampshireNew Hampshire Housing Finance Authority
New JerseyNew Jersey Housing and Mortgage Finance Agency
New MexicoNew Mexico Mortgage Finance Authority
New YorkNew York State Homes and Community Renewal
North CarolinaNorth Carolina Housing Finance Agency
North DakotaNorth Dakota Housing Finance Agency
OhioOhio Housing Finance Agency
OklahomaOklahoma Housing Finance Agency
OregonOregon Housing and Community Services
PennsylvaniaPennsylvania Housing Finance Agency
Rhode IslandRhode Island Housing
South CarolinaSouth Carolina State Housing Finance and Development Authority
South DakotaSouth Dakota Housing Development Authority
TennesseeTennessee Housing Development Agency
TexasTexas Department of Housing and Community Affairs
UtahUtah Housing Corporation
VermontVermont Housing Finance Agency
VirginiaVirginia Housing
WashingtonWashington State Housing Finance Commission
West VirginiaWest Virginia Housing Development Fund
WisconsinWisconsin Housing and Economic Development Authority
WyomingWyoming Community Development Authority

Mortgage credit certificates are another option. These are programs run by state and local housing finance agencies that allow qualifying homebuyers to get a tax credit on the interest they pay on their mortgage and reduce their tax bill by up to $2,000 per year.

Non-profit and community programs

You can also check with local non-profit and community groups in your area. These often offer housing help, like closing cost or down payment assistance. Some may also have grant or low-cost loan programs that can give you a leg up.

Mortgage options for low-income buyers

As you research your different mortgage options, look for ones that allow low down payments and are geared toward low-income borrowers.

"Fortunately, there are a number of mortgage and assistance programs available that can help low-income homebuyers navigate the homebuying process," Rudy says.

FHA loans

Mortgages insured by the Federal Housing Administration are often a good fit for low-income borrowers because they allow low down payments, have less stringent requirements, and come with lower rates than conventional mortgages.

"One of the best mortgage programs for low-income borrowers is an FHA loan," says Bill Gassett, realtor and founder of Maximum Real Estate Exposure. "The program puts a significant amount of people into a home who would otherwise not qualify."

FHA loans require a down payment of 3.5% and a credit score of at least 580, though you can potentially be approved with a lower score if you can make a larger down payment.

An FHA 203(k) loan might be a good fit for you if you're looking at homes that are priced lower but need some repairs. These loans let you purchase a home and finance improvements to it, all in a single mortgage.

USDA loans

Low-income individuals who live in rural or suburban areas can apply for a USDA loan, which is a mortgage guaranteed by the Department of Agriculture. With one of these mortgages, you can put zero down without having to pay mortgage insurance. You'll typically need a credit score of at least 640 to qualify.

If you're very low income and currently don't have "decent, safe, and sanitary housing," you might be eligible for a direct USDA loan. With direct USDA loans, the USDA is the lender.

VA loans

If you're a service member, veteran, or surviving spouse, you may be eligible for a VA loan. These mortgages are guaranteed by the U.S. Department of Veterans Affairs. It allows 0% down payments with no mortgage insurance. VA loans also typically have lower rates than conventional loans.

To qualify, you'll need to meet minimum service requirements. Many lenders also require a credit score of at least 660, though some will allow scores of 620 or even 580.

Conventional loans with low down payment options

Conventional loans are mortgages that aren't backed by a government agency. Many of these mortgages are backed by either Fannie Mae or Freddie Mac, which allow down payments as low as 3%.

Some lenders may also have their own specialty mortgage options that allow low down payments and come with special benefits for low-income or first-time homebuyers. Alliant Credit Union, for example, has a 0% down option for first-time homebuyers that doesn't require private mortgage insurance, while Chase offers grants that can be used toward your down payment.

Saving for a down payment with low income

The down payment can be a big hurdle when you're buying a home on a tight budget. Unless you qualify for a USDA or VA loan, you'll need at least 3% to buy a house (or more, if you need an FHA loan). These low-income homebuying tips can help you get it.

Tips for saving on a tight budget

Start saving for your down payment early — as soon as you set your sights on a home purchase. Commit to saving a portion of each paycheck to savings, or opt for a budgeting app that rounds up — rounding your purchases up to the nearest dollar and depositing that extra change right into a savings account.

Make sure you're using a high-yield savings account, too. The difference in interest earnings in these can be substantial.

Finally, save any windfalls you may come across throughout the year — things like tax returns or holiday bonuses, for instance. These can make a big dent in your savings goals.

Down payment assistance programs

Many different entities offer down payment assistance in the form of loans or grants. Check with your city, county, and state's housing authorities to see if they offer this assistance to low-income or first-time homebuyers. Some nonprofits may offer help as well.

Pay attention to the type of assistance offered. Grants don't need to be paid back, but loans often do. Some loans, however, may be forgivable if you remain in the home for a certain amount of time.

Improving your credit score for home buying

Your credit score will impact what loans you can qualify for and how much they cost you. If your credit score is low, consider boosting it before buying a house on a tight budget. To do this, you should:

Understand credit requirements

Qualifying for a mortgage is a balancing act between your credit, debts, income, and down payment. If you have a low income, working on other factors in your application can help compensate for that.

The main hurdle for low-income borrowers is likely going to be their debt-to-income (DTI) ratio. Your DTI ratio calculates the percentage of your income that you spend on debt. If you earn $4,000 each month and your monthly mortgage payment is $2,000, you have a DTI of 50%.

Generally, your DTI will need to be 50% or less, but it can vary depending on the loan type and lender. Your DTI limits how much house you can afford, which can make home shopping challenging for low-income folks. If your DTI only allows you to borrow up to $150,000 and the average home price in your area is significantly higher than that, you might have a hard time finding a home in your price range.

Lenders will also look at your credit score and how much you have for your down payment and closing costs.

For conventional mortgages, you'll usually need a score of at least 620. FHA mortgages require a score of 580. The higher your score, the more likely you are to be approved. Higher scores also help you to get more attractive interest rates.

You'll need to put at least 3% down for a conventional mortgage and 3.5% down for an FHA mortgage. If you can put down more, you might have an easier time getting approved with a low income. Just don't forget to factor in closing costs, which typically equal 3% to 6% of the loan amount.

Take steps to improve your credit

Improving your credit is one of the best things you can do — both to qualify for a mortgage and to get a lower interest rate.

To do this, you can:

  • Pay down your debts.
  • Dispute errors on your credit report.
  • Pay your bills on time.
  • Reduce your credit utilization rate.
  • Keep your old accounts open, even after paying them off.

Sign up for a credit-monitoring service so you can keep track of your progress. (Your bank might also offer this for free).

Finding affordable homes

Once you're ready to pull the trigger, it's time to start the home search. This can be challenging when working on a budget, but there are some ways to ease the process. Here's how to find affordable homes for low-income buyers:

Work with a real estate agent

A real estate agent can help point you toward more affordable areas and properties. They can also negotiate on your behalf once you find a home you like.

In most cases, agent commissions are paid by the seller.

Research affordable neighborhoods

Knowing what areas are in budget (and aren't) can help you hone your home search. Check sites like Zillow, Redfin, and Realtor.com to get an idea of what homes cost in your city, and filter results by price range to determine the best areas to zero in on. Then, work with your agent to mine listings in these communities.

Consider foreclosures and fixer-uppers

While move-in ready homes are nice, they also come with a price premium. If you're looking to save cash, buying a previously foreclosed-on home or a fixer-upper may be the way to do it. You can even use a loan like a FHA 203(k) to roll the cost of repairs into your loan balance.

Homebuying on a low income FAQs

What programs are available to help low-income individuals buy a home?

Federal, state, local, and non-profit programs offer low-income homebuyers assistance with down payments, closing costs, and favorable loan terms.

Can I get a mortgage with low income?

Yes, there are various mortgage options for those with a low income, such as FHA, USDA, VA, and conventional loans with low down payment options designed for low-income buyers.

How can I save for a down payment on a tight budget?

To save for a down payment with a low income, create a budget, reduce unnecessary expenses, and explore down payment assistance programs for low-income homebuyers.

What credit score is needed to buy a house with low income?

Credit score requirements vary by lender and loan product, but improving your credit score can help secure better loan terms and options.

Are there specific loan programs for low-income buyers?

Yes, FHA, USDA, and VA loans are specifically designed to help low-income buyers afford homeownership.

Molly Grace

Mortgage Reporter

Molly Grace is a mortgage reporter for Business Insider with over six years of experience writing about mortgages and homeownership.ExperienceIn addition to her daily mortgage rate coverage, Molly also writes mortgage lender reviews and educational articles on homebuying and analyzes data and economic trends to give readers actionable and up-to-date information about the housing market.She also tracks affordable mortgage and down payment assistance programs offered throughout the country to keep her readers informed of homebuyer programs available to them.Before Business Insider, Molly was a blog writer for Rocket Companies and helped to create Rocket Mortgage’s Shorty Award-winning podcast Home. Made.Molly is passionate about covering personal finance topics with empathy. Her goal is to make homebuying knowledge more accessible, especially for groups that may think homeownership is out of reach.ExpertiseMolly is an expert in the following topics:

  • Mortgages and mortgage lenders
  • Home equity
  • The housing market
  • The economy and the forces that impact mortgage rates
  • Budgeting and saving
  • Credit
  • Insurance
  • Retirement savings

EducationMolly earned a bachelor's degree in journalism from Indiana University.She is based in Michigan and has a dog and two cats.

Aly J. Yale

Aly J. Yale is a writer and editor with more than 10 years of experience covering personal finance topics including mortgages and real estate. She contributes to Personal Finance Insider’s mortgages and loans coverage.ExperienceAly began her journalism career as reporter, and later an editor, for several neighborhood sections of the Dallas Morning News.Her work has been published in several national publications, including Bankrate, CBS, Forbes, Fortune, Money, Newsweek, US News and World Report, the Wall Street Journal, and Yahoo Finance. She’s also contributed to a variety of mortgage and real-estate publications, such as The Balance, Builder Magazine, Housingwire, MReport, and The Mortgage Reports.Her favorite personal finance tip is to schedule regular check-ins to make sure your credit cards, savings accounts, and other financial vehicles still align with your budget and financial goals. She is a member of the National Association of Real Estate Editors (NAREE).ExpertiseAly’s areas of personal finance expertise include:

  • Mortgages
  • Loans
  • Real estate
  • Insurance

EducationAly is a graduate of Texas Christian University, where she received a bachelor’s degree in radio/TV/film and news-editorial journalism.

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How to Buy a House with Low Income: Tips and Assistance Programs (2024)

FAQs

What credit score do I need to buy a house with no money down? ›

You'll usually need a credit score of at least 640 for the zero-down USDA loan program. VA loans with no money down usually require a minimum credit score of 580 to 620. Low-down-payment mortgages, including conforming loans and FHA loans, also require FICO scores of 580 to 620.

How do you get a house when you don't make enough money? ›

If you could use some assistance buying a home, check out what assistance programs your state or local government offers hopeful homeowners. Local charities or nonprofits may also provide homeownership assistance. Some state or local housing agencies may offer down payment assistance as grants or forgivable loans.

How can I get a low monthly house payment? ›

How to lower your mortgage payment: 10 strategies to consider
  1. Refinance to a lower rate.
  2. Lengthen your loan term.
  3. Recast your mortgage.
  4. Ditch mortgage insurance.
  5. Appeal your property taxes.
  6. Shop for cheaper homeowners insurance.
  7. Rent out your spare space.
  8. Submit biweekly payments.
May 22, 2024

Can you buy a house making 25K a year? ›

The general rule of thumb is to keep your mortgage payment between 25-33% of your total monthly income. Here's what that looks like if you make 25K a year: 25% of your monthly income: About $521 total monthly mortgage payment. 33% of your monthly income: About $688 total monthly mortgage payment.

Can I get an FHA loan with a 500 credit score? ›

You can qualify for an FHA loan with a low credit score of 500 and a 10% down payment, or 3.5% down if your FICO is 580 or above. FHA loans accept applicants with credit scores as low as 500. Applicants with scores between 500 and 579 need a 10% down payment.

What credit score is needed to buy a $300k house? ›

Credit Score

For a $300,000 home, you'll likely need a good credit score: 740+: Best rates and terms. 700-739: Slightly higher rates. 660-699: Higher rates, may require larger down payment.

What is the lowest income to qualify for a house? ›

There's no universal minimum income required for mortgage loans. Your approval depends on the mortgage amount, your debt-to-income ratio, credit score, and other factors. However, you need to prove that you have a stable income that's sufficient to cover the mortgage payments, property taxes, and homeowner's insurance.

How to buy a house when you're broke? ›

Considerations while mortgage hunting
  1. See if you qualify for a VA loan. ...
  2. Consider an FHA loan. ...
  3. Opt for a Homebuyer Assistance Program. ...
  4. Don't Overlook the USDA Loan. ...
  5. Receive a Down Payment Gift. ...
  6. Have the Seller Pay Closing Costs.

Can a poor person afford a house? ›

There is not a specific minimum income to qualify for a mortgage and there are various loan types and programs designed to help eligible buyers cover a down payment or even closing costs.

What's the lowest down payment for a house? ›

FHA loan: 3.5 percent down payment

For a Federal Housing Administration (FHA) loan, the minimum down payment is 3.5 percent with a credit score of at least 580. If you have a credit score between 500 and 579, you can still get approved, but you'll need a 10 percent down payment.

What is a reasonable monthly house payment? ›

To determine how much you can afford using this rule, multiply your monthly gross income by 28%. For example, if you make $10,000 every month, multiply $10,000 by 0.28 to get $2,800. Using these figures, your monthly mortgage payment should be no more than $2,800.

Which type of mortgage has the lowest monthly payment? ›

Interest-only mortgages

With an interest-only mortgage, in the short term, your monthly mortgage payment will be lower because you're not paying off principal.

Can you afford a house making $50,000 a year? ›

On a $50,000 salary, you could potentially afford a house worth between $160,000 to $190,000, depending on your specific financial situation and local market conditions. While this may limit your options in some high-cost areas, there are still many markets where homeownership is achievable at this income level.

How much house can I afford with $10,000 down? ›

Calculating maximum home price with $10,000 down
LoanDown paymentHome value
Conventional$9,900 (3%)$330,000
FHA$10,000 (3.5%)$285,000
VA$0 (0%)$350,000
USDA$0 (0%)$300,000
Aug 21, 2024

Can I afford to buy a house if I make 30k a year? ›

A general rule of thumb is that no more than 30% of your pre-tax income should go towards housing costs, but that can vary by lender. At one point, lenders used what is called the 28/36 rule to ensure a borrower could afford the loan. Under this rule, housing expenses should take up 28% or less of your gross income.

What is a good credit score for no down payment? ›

Today, no-down-payment home loans are only available to select individuals with high credit scores who can document adequate income needed to repay the loan. Such homebuyers must also exhibit good credit, usually with minimum scores in the mid-600 range.

How much can I borrow with a 700 credit score? ›

You can borrow from $1,000 to $100,000 or more with a 700 credit score. The exact amount of money you will get depends on other factors besides your credit score, such as your income, your employment status, the type of loan you get, and even the lender.

Can I buy a house with a 580 credit score? ›

The Federal Housing Administration (FHA) insures FHA loans, which allows mortgage lenders to accept a credit score as low as 580 with a 3.5 percent down payment, or 500 with a 10 percent down payment.

Can you buy a house with a 550 credit score? ›

You'll typically need a credit score of 620 to finance a home purchase. However, some lenders may offer mortgage loans to borrowers with scores as low as 500. Whether you qualify for a specific loan type also depends on personal factors like your debt-to-income ratio (DTI), loan-to-value ratio (LTV) and income.

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