Top 5 Low-Income Home Loans of 2021


If you’re living on a limited income, it’s easy to assume that homeownership just isn’t in the cards for you. After all, it’s challenging to save up a 20% down payment on a home when you’re working with a limited budget.

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And if you struggle with poor credit or have a high debt-to-income ratio, buying a house can feel even more out of reach. Fortunately, there are many home loan programs available to help borrowers just like you.

This article will review five home loan programs that specialize in helping low-income borrowers reach their goal of home ownership. Chances are, at least one of them will be a good fit for your situation.

5 Low-Income Home Loans You Can Consider

If you want to buy a house but are concerned that you don’t make enough money, there are options available to you. Listed below are five low-income home loans you can consider.

1. FHA Loans

FHA loans are a good option for low-income borrowers because they have relaxed credit requirements and low down payment options. The mortgage is backed by the Federal Housing Administration (FHA), so it’s easier to qualify for than a traditional mortgage.

If your credit score is at least 580 or higher, you can qualify for a mortgage with a 3.5% down payment. If your credit score is between 500-579, you’ll need to put down a 10% down payment.

The good news is that your down payment can come from savings or financial assistance gifted from a family member. The loan will be set at a fixed rate term for either 15 or 30 years.

However, FHA loans cannot be used to purchase rental property. The home you’re buying must be your primary place of residence.

Eligibility Requirements:

  • FICO score between 500-579 with a 10% down payment.
  • FICO score of 580 or higher with a 3.5% down payment.
  • The home must be appraised by an FHA-approved appraiser.
  • The home must be your primary place of residence.
  • Borrowers must occupy the property within 60 days of closing on the loan.

2. VA Loans

VA loans are designed to help military members and veterans find affording housing. You may also qualify for a VA loan if you’re the surviving spouse of veteran that died during service or from a service-related disability.

You’ll apply for the loan through a bank or credit union and the VA backs the loan. VA loans are one of the most affordable loan programs available because there is no required down payment, and you don’t have to purchase private mortgage insurance (PMI).

There are also no stated credit requirements, but individual lenders can set their own standards. Most lenders look for a credit score of at least 620 or higher.

Eligibility Requirements:

  • Active duty military members that served at least 90 continuous days.
  • Veterans that served 90 continuous days in active wartime or 181 days in peacetime.
  • Veterans that completed six years in the National Guard.
  • The surviving spouse of a veteran who died while in service or from a service-related disability.

3. USDA Loans

USDA loans are a great option for low-income borrowers who are looking to purchase a home in a rural or suburban area. The program is similar to FHA and VA loans in that the USDA guarantees the loan.

If you qualify for a USDA loan, you can purchase a home in a rural or suburban area with no down payment. And the interest rates tend to be much lower than conventional home loan programs.

However, these loans are designed specifically for low to moderate income borrowers. To qualify, your income cannot exceed 115% of the median income for that area. And the house you purchase must be located in an area deemed eligible by the USDA.

Eligibility Requirements:

  • Must be a U.S. citizen, non-citizen national or Qualified Alien.
  • Home must be located in an eligible rural or suburban area.
  • Income cannot be more than 115% of the median income for that area.

4. 97 LTV Purchase Program

FHA loans are a great option, but they can come with hefty fees and you have to purchase private mortgage insurance (PMI). If you’re looking for an alternative to taking out an FHA loan, you might consider the 97 loan-to-value (LTV) purchase program.

The 97 LTV program allows borrowers to purchase a home with a 3% down payment. The rates are typically low and there are many lenders available that offer this program.

If you have a credit score of at least 620 or higher, you may be a good candidate for the 97 LTV purchase program. And according to Fannie Mae’s regulation, the down payment can be gifted to you from a family member.

Eligibility Requirements:

  • You’re purchasing a one-unit single-family home, condo, co-op, or PUD.
  • The property must be your primary residence.
  • If there are multiple borrowers, at least one of them hasn’t owned a home in the last three years.
  • The total loan amount is less than $510,400.

5. Good Neighbor Next Door Program

If you work in a certain type of profession, you may be eligible for the Good Neighbor Next Door Program. This program is offered by the Department of Housing and Urban Development (HUD).

The Good Neighbor Program encourages citizens to revitalize their community through homeownership. To qualify, you must work in public service and purchase a home in an HUD revitalization area.

You also must be willing to live in the home for at least three years after purchasing it. Participants are required to certify that they’re still living in the home on a yearly basis.

The benefit of the Good Neighbor Next Door Program is that participants receive hefty discounts on the sale of their home. And you can use a conventional, FHA or VA loan to finance the purchase.

Eligibility Requirements:

  • To qualify, you must be either a full-time teacher, emergency medical technician, law enforcement officer, or firefighter.
  • You must qualify for an FHA loan, VA loan, or conventional mortgage.
  • You must be willing to purchase a home in a HUD revitalization area.
  • You’re willing to make an offer on the home through the HUD Homestore within a week of its posting.
  • Must be willing to live in the home for at least three years after purchasing it.
  • Must certify that you’re still living in the home on an annual basis.

Bottom Line

It can be challenging to buy a home as a low-income borrower, but it’s not impossible. The previous five programs make it possible for low-income borrowers to purchase the home that’s right for them.

Even if you don’t think you’ll qualify, there is no harm in looking into each of these options to see if you can get approved for a mortgage.

Make sure you consider all of your options and look for the lender that offers you the best rates. If you’re not sure where to start, you can try contacting a qualified loan officer. They can evaluate your financial situation and help you determine which program is the best fit for you.

Jamie Johnson
Meet the author

Jamie Johnson is a freelance writer who has been featured in publications like InvestorPlace and GOBankingRates. She writes about a variety of personal finance topics including student loans, credit cards, investing, building credit, and more.