Homeownership is one of those pursuits where the cost is almost more well-known than any of the benefits. Everybody wants to own their own house, and the question “How hard is it to get a mortgage” can be frightening when you’re a low-income household.

With more households becoming low-income, year after year, there’s less buying power out there. Which is a real pity because, well, everybody wants to own their own house, right?

Join us today, as we break down how to buy a house with low income, so you can buy the home of your dreams regardless of your income status.

Homeownership vs. Renting

Before we get started, let’s just say that we understand: you came here looking for advice on buying a house because you’ve decided you want to buy. But before we move into the realm of buying on a low income, it’s important to decide, absolutely, that you don’t want to rent.

You’ve got to, at least once, compare the costs of renting with the costs of homeownership, and make a call on whether this price is worth it to you. For a low-income household, a two-bedroom apartment for less than a mortgaged one bedroom makes a lot of sense until the market changes.

Location may help if you aren’t locked into one place. Low-income earners can opt to be more flexible on where they look for homes, going across the county line to look for better prices.

HUD Homes

U.S. Department of Housing and Urban Development, or HUD homes, sell for far less than a bank or privately-owned property. Thousands less, in fact.  There is, however, a need for caution.

When buying a HUD home, you’ll need to make sure it’s professionally inspected before moving forward with the buy. Government agencies aren’t responsible for making repairs to these properties before selling them. Which is fine, provided you bring an inspector in to make sure the house won’t fall apart two months after you move in.

As an additional note, HUD doesn’t pay for correction of defects or repairs. What you see is what you get, and if you go in understanding that, you’ll be better prepared to buy something of high quality.

Finally, in the case of veterans, the Department of Veterans Affairs does not underwrite VA loans on HUD homes. If you buy a HUD home in need of repair, one possible avenue is applying for an FHA 203(k) Rehabilitation Loan. You’ll obviously need to pay back this money, but the plus side is that this will be at a far lower interest rate than traditionally.

FHA Loans

FHA government-insured home loans offer good terms for buyers with less buying power. Backed by the Federal Housing Authority, one of these loans requires a visit to either a bank or mortgage broker, first and foremost.

Once you’ve found a provider that works with FHA loans, your lender can fund the loan with the government’s insurance against any default. This makes these loans one of the best answers out there to the question “How to get a mortgage on a low income?”

The government covers any losses should you decide to foreclose and, as a result, lenders work according to a set of minimum standards. Some will be tougher, ranging from minimum credit scores to guidelines on how much you should have in savings.

Most of the time, however, these institutions will stick to the minimum guidelines, as outlined by the FHA. Which is great news for you, as these guidelines offer are one of the best deals out there for borrowers applying for loans on affordable terms.

With down payments as low as 3% of the total amount of your lown, you come out smiling against traditional loans, where that number ranges from 10 to 20%. There’s also lower mortgage insurance and interest rates attached to a loan like this, which means lower monthlies.

As a last note, FHA loans also concern themselves much less over your credit score, which is a boon to low-income earners.

Housing Programs

Wondering how to get a mortgage with low income? Many states and local municipalities feature robust public housing departments. This is a prime opportunity for homeowners, and you should contact your local agency for more on assistance programs.

Agencies may assist low and moderate-income earners with their down payments, for instance. There are plans out there that help with rehabilitation costs, inspections, and closing expenses. Government incentives for first-time buyers, and even programs that help people based on which field they work in.

There may be more available than you realize. Reach out to your local municipality today to find out for sure.

Private Sector

Is it hard to get a mortgage when you don’t earn enough? For the most part, the answer to this is yes. Private, non-profit organizations, however, help low and moderate-income households transitioning into homeownership.

Habitat for Humanity, for example, is an organization that works through volunteer labor and donations. Millions of homeowners have benefitted from the hundreds of hours of building labor that goes into each of their homes. Units are sold to families at zero profit and come packaged with affordable loans to boot.

As an added bonus, the monthly mortgage payments go toward building more houses. Private organizations and non-profits offer a variety of services in states across the country. Some of this assistance goes highly underpublicized, and it’s important to do your homework and find out what your options are.

How To Buy A House With Low Income

Ultimately, the best advice for the low-earning potential homeowner is to find out what your options are. The easiest way to get a mortgage is to call someone in the industry and find out what they have to offer. There are more options from government and the private sector than many people realize, and they are waiting to do business.

Buying, moving into, and maintaining a home is no small feat, no matter your income level. For more on everything from how to buy a house with low income to how to pay for home renovations, check out our other awesome blog content today!