Thanks to the many low income home loans available in the market today, you can be a homeowner, that’s right, even if you don’t make a lot of money.
In this article, my goal is to inform you of many of the tools you need to find, apply for, and successfully close on a mortgage loan despite having a low income.
These home loans will give you the hope that you can buy a home without having to save 10% to 20% of the home’s price for a down payment..And more important, you need to be sure that you can afford the monthly payment once you move in.
- Low-income home loan options
- Downpayment assistance
- Grants for low-income families
- Seller-paid closing costs
- How lenders decide to approve your loan

Building a house takes a well-stocked tool belt, and so does buying one. Here are some of the best low income mortgage options.
Finding the perfect home loan for a low budget is a process but it’s one worth undertaking. Discovering the low income home loan types might be just the first step. See Part 2 of this article about how lenders decide whether you’re approved for the loan. Your next steps may be to work on your credit or savings habits to make your loan app look that much better. For now, let’s get right to the specific home loan programs.
The USDA loan lets you buy a home with zero that right NO down payment. It’s available for properties in areas that the USDA designates as rural, although many eligible areas are quite suburban. To check out eligible areas, see USDA’s property eligibility map.
This program is also called the Rural Development loan or USDA Guaranteed Loan program. It has been fantastic home loan for low income families over the years. You can buy a home at a low interest rate with little or nothing out of pocket.
What’s more, the USDA loan is specifically designed for
- People who do not already own an adequate home.
- Those persons who make 115% or less of the area’s median income.

The USDA Home Loan program is set up specifically as a home loan for low income families. Also known as a Section 502 loan, they are available to individuals with low incomes, which is defined as 50% to 80% of the area’s median income.
You can have a 33 year loan term, or even a 38 year term in some cases. And, payment subsidies are available for those who don’t qualify for the full payment.
To see if your household income is within limits, see USDA’s Direct home Loan income limits page.
Keep in mind standard home loan lenders may not offer this program. You can apply here to see if you qualify. Click Here!
Your income needs to be too low for other loan programs to be eligible. You have to make sure you don’t qualify for a standard USDA home loan before you apply for a USDA direct loan.
Almost everyone has already heard of the FHA loan program. It’s another government-backed loan type that helps low income individuals purchase a home. Here are the highlights of the FHA loan program:
- 3.5% down payment
- The seller can pay all or most of your closing costs
- Allows lower credit scores lower than conventional financing
As a low income home buyer, here are some additional features of an FHA loan that you will be interested in:
- The 3.5% down payment can come from gift money.
- The FHA Loan program has more lenient debt ratio requirements than conventional home loan financing, meaning that you might qualify with a lower income.
- FHA does not require you to have extra money in the bank after closing the loan.
- You can use a co-signer (another party who contributes to the loan repayment but won’t live in the home).
FHA loans are designed with low income families in mind. It has helped millions break into home ownership despite traditional barriers.
An FHA 203k loan is basically an FHA loan with an added feature: the ability to finance the purchase price and rehab costs into the mortgage.
This loan program is one of the best low income home loans because it lets take advantage of lower prices on fixer-uppers.
At the end of this article, I talk about how the lender makes sure the property meets minimum standards. Well, with an FHA 203k, that doesn’t matter. You finance the repairs needed to bring it up to FHA’s minimum property requirements.
Because homes that don’t meet requirements traditional financing, they are typically steeply discounted. This allows those with a lower income to get into a home more easily.
Click here to check your eligibility now.
If you have military experience, the VA mortgage should be the first low income mortgage option you check out. It requires zero down payment and the seller can pay all or most of your closing costs.

There’s no monthly mortgage insurance which can save you hundreds per month. No mortgage insurance means you can buy more home with less monthly income compared to other loan types.
And, VA loans are more lenient on debt ratio and credit score requirements. Many low income individuals and families have used a VA loan to buy their first home.
To be eligible, you must have US military service experience of at least
- 90 days or more in wartime if currently on active duty
- 181 days or more in peacetime
- 24 months or the full period for which you were ordered, if now separated from service.
- 6 years, if in the National Guard or Reserves
If you are eligible, you could be very close to owning your own home despite currently being on a low income.
Click here to check your VA home loan eligibility.
Editor’s note: Fannie Mae ended their HomePath program on October 6, 2014. For more details, visit our Fannie Mae HomePath page.
The HomePath program allows low income home buyers to qualify more easily than most other loan programs. Here are a few of the great things about HomePath:
- Only 5% down payment required
- No appraisal required
- No minimum property standards to meet
- No private mortgage insurance required.
This loan could help you buy a fixer upper at a low price. Your monthly payment will fit into your budget much easier than many homes that are in top shape. And no mortgage insurance means a big reduction in your monthly costs.
These homes are Fannie Mae-owned foreclosures. Fannie’s goal is to sell these homes to great potential homeowners like you. So, they remove many of the traditional roadblocks to owning a home like PMI and a large down payment.
That’s great news for buyers looking for a low income mortgage. Find a list of homes for sale in your area by searching on HomePath.com. Then call an approved HomePath lender here and get started.
There’s also an option to purchase and repair the home with a HomePath Renovation loan. You can buy and fix up the property to your liking, using just one loan.
See complete HomePath guidelines here and HomePath Renovation guidelines here.
The new HomeReady program from Fannie Mae is extremely flexible on sources of income. Applicants can use the income of household members who are not on the loan as a compensating factor. That means a family member who does not want to be on the loan can still help you qualify.
In addition, you can use boarder and roommate income, rental income from a basement apartment, and non-occupant co-borrower income to qualify.
The down payment requirement is just 3% and can come entirely from a gift or approved down payment assistance program.
See if you can buy a home with the HomeReady mortgage program.
Many local governments offer DPA funds to lower income borrowers. Down payment assistance programs revitalizes urban and suburban areas. It encourages families to buy homes, move in, and improve the community.
Here are some examples of down payment assistance available:

- Orlando, Florida: $42,000
- New Jersey: $800
- Connecticut: $14,000
- Seattle: $45,000
- St. Louis, Missouri: $5,000
All across the country, there are city-, county-, and state-based grant programs to help low income families to buy a house.
And I’m going to tell you how to find them.
Housing is getting expensive, especially in major metros. That’s why local governments are getting involved in down payment and closing cost assistance.
Many locales can’t bring home prices down in their region. But what they can do is give away money to help families get into homes when they otherwise couldn’t.
Unfortunately, there are not many, if any, centralized databases of all these individual grant programs. Each grant has its own rules, dollar amounts, and geographic restrictions.
But you can find these programs with something you use all the time anyway: Google.
Check this out.
Simply Google your city, state, or county name followed by “housing grant”. In about 3 minutes, I was able to find very good programs in Seattle, Miami, North Dakota, Connecticut, and Clark County, Nevada.
Literally every location I Googled had a housing program.
Here’s a sample of what I found:
- Seattle: Up to $55,000 (yes, that much) in down payment assistance to families earning less than 80% of the area median income.
- Miami: 2% of the home price for low- and moderate-income families
- North Dakota: Just $500 out of pocket to buy. First-time home buyers who meet income requirements are eligible.
- Connecticut: Full down payment covered (typically 3-3.5%) via a low-interest loan.
- Clark County, Nevada: A non-repayable grant of 4% of the loan amount to cover down payment and closing costs.
These are just a few of the hundreds of grant programs available across the country for low income families. With just a few minutes of research you could be on your way to homeownership through a grant program.
When looking for low income mortgage loans, you’ll want to consider the total cost of getting into a home, which includes the down payment plus the loan closing costs.
A great way to reduce costs is getting the seller to pay your closing costs. Closing costs can be several thousand dollars which could put a real hamper on your home buying aspirations.
Why would the seller pay your closing costs? Because the current owner of the home wants to sell the home, probably almost as much as you want to buy it. Many homeowners or banks (if the home is a foreclosure) give the buyer thousands of dollars to ensure a smooth closing.
Work with your real estate agent to go about asking for closing costs properly. You’ll need to ask for the right amount for the situation.
If the home you are looking at has multiple offers, they probably won’t accept one that is asking for closing cost help.
You may want to look at homes that need work or are in less demand. Sellers are usually more willing to pay closing costs in markets that are still flooded with foreclosures.
Closing costs are no fun, but a reality when getting a mortgage, even a mortgages for low income families. If there’s any chance the seller will help, you might as well ask.
Click here to check your home buying eligibility status.
Now that we’ve reviewed your tools as a low income home buyer, let’s dive in to the basics of getting a mortgage. These are rules that apply to anyone, with any income, getting any type of mortgage.
Credit. This is the one area of the loan application where you can really shine even if you have low income. A lender wants to know you’ve been faithful in smaller responsibilities before handing you a big responsibility. It doesn’t matter that your auto loans, credit card limits and such are smaller than those of higher income borrowers.
The only thing that matters is that you’ve handled the credit – whatever size – responsibly.
A great credit score can raise the dollar amount you qualify for. If you don’t have a great credit score, you may want to work on that first before continuing your homeownership journey. As a low income borrower, you need to have all other aspects of your mortgage application in top shape to get the best home available. Check out our articles and videos on credit here.
Employment. The lender will want to see that you have steady employment, even if income from that employment is low at the moment.
It looks much better on a mortgage application if you’ve had one job over the past 2+ years rather than many jobs. The lender wants to know that you can hold down a job. It will be your means of repaying your mortgage, after all.
If you have had a few jobs over the past few years, work up a great letter explaining why you changed jobs. Did downsizing force you to change jobs? Also, tie each employment experience together, stating how each one relates to the other. A long time in the same line of work looks much better than a long history of unrelated jobs.
Debt vs. Income. This is a big one. This could make the difference between you owning a home and continuing to rent.
The lender will look at how much debt you have compared to your income. Since your income is low, you want your debt payments to be low as well.
Here’s why: you are capped at using about 45% of your gross income for your entire housing costs plus any monthly debt. Here’s an example:
- $3,000 gross monthly income
- 45% = $1,350
- $200 car payment
- $250 student loan payment
- $50 minimum credit card payments
That’s $850 per month left for principle, interest, property taxes, HOA dues, and homeowners insurance.
But if you had just $50 per month in credit card bills and no other debt, you would have up to $1,300 available for a house payment. That a $100,000 increase in your buying power because of $450 less in monthly debt.
In the months and years before buying a home, make a plan to pay off debts.
Down Payment. It’s tough to save money. On a tight budget, it’s hard enough to put food on the table. Luckily there are home loans for low income families. Many options don’t require a down payment. I go over these programs in the “Tool Belt” section below.
Still, the lender will want to see that you can save money. So even if it’s only $25 per month, see what expenses you can cut out of your budget to put toward a savings account.
Property. The lender checks out the property to make sure it meets minimum requirements. You might be tempted to look into a fixer-upper to get a lower purchase price that fits within your budget. That’s fine, just keep in mind that loan approval is tough with a beat up home.