If you’re working with a limited income, the dream of owning a home might seem out of reach. Between saving for a down payment and meeting credit or income requirements, it’s easy to feel like homeownership isn’t achievable. However, there are various loan programs specifically designed to help low- and moderate-income borrowers purchase a home.
These programs offer benefits like low down payments, reduced interest rates, and even grants or assistance to cover upfront costs. Whether you’re a first-time buyer or someone looking to buy again, you’ll find options tailored to meet your needs.
In this article, we’ll explore 10 of the best home loan programs available in 2025, including government-backed loans like FHA, VA, and USDA loans, as well as innovative options like Fannie Mae’s HomeReady program and state-specific assistance programs. These loans can make homeownership more accessible and affordable than you might think.
11 Programs to Help Low-Income Buyers Become Homeowners
Even if you have a limited income, there are mortgage programs specifically created to make homeownership more attainable. These programs offer benefits like flexible credit requirements, lower upfront costs, and financial assistance, helping you take the next step toward owning a home.
Government-Backed Home Loan Programs for Low-Income Buyers
These government-insured loans are designed to make homeownership more accessible by lowering credit barriers, reducing down payments, and offering more flexible approval guidelines. They’re ideal for low-income borrowers who need extra support getting into a home.
1. FHA Loans
FHA loans are backed by the Federal Housing Administration and are a popular option for low-income buyers with less-than-perfect credit. You can qualify with a credit score as low as 580 and just 3.5% down.
- Flexible credit requirements: Minimum credit score of 580 with 3.5% down, or 500 with 10% down.
- Low down payment: Just 3.5% if you meet the credit threshold.
- Gift funds allowed: Down payments can come from family, grants, or savings.
- Fixed rates: Typically available in 15- or 30-year fixed terms.
FHA loans require mortgage insurance, including an upfront fee and ongoing monthly premiums. Loan limits vary by area, with higher limits in high-cost regions.
2. VA Loans
VA loans are for eligible veterans, active-duty service members, and surviving spouses. They require no down payment and no private mortgage insurance, making them one of the most affordable options available.
- Zero down payment: Finance 100% of the home’s price.
- No private mortgage insurance: Save hundreds per month.
- Competitive rates: Often lower than conventional loans.
- Flexible credit guidelines: Most lenders prefer a minimum credit score of 620.
You’ll need a Certificate of Eligibility from the VA and must meet service requirements. There’s a one-time funding fee, though some veterans are exempt.
3. USDA Loans
USDA loans are backed by the U.S. Department of Agriculture and offer zero-down financing for homes in eligible rural and suburban areas. They also come with low interest rates and affordable mortgage insurance.
- No down payment: Finance the full purchase price.
- Lower insurance costs: Annual fees are cheaper than FHA loans.
- Flexible income requirements: Household income must fall below 115% of the area median income.
- Location restrictions: Only for homes in USDA-eligible areas.
Loan eligibility depends on income, location, and debt-to-income ratio. Use the USDA’s online map to check if a property qualifies.
4. Native American Direct Loan (NADL) Program
This VA-administered program helps eligible Native American veterans buy, build, or improve homes on Federal Trust Land. It offers the same benefits as standard VA loans but is exclusively for this group.
- No down payment: 100% financing available.
- No mortgage insurance: Save monthly.
- Low fixed interest rates: Set by the VA.
- Use on tribal land: Home must be on Federal Trust Land with tribal government participation.
Borrowers need to meet VA service requirements, secure a specific Certificate of Eligibility, and ensure their tribal government has an agreement with the VA.
Conventional Loans With Low Down Payments
These programs are not government-insured, but they offer many of the same benefits—like low down payments and flexible credit guidelines—especially for first-time or low-income homebuyers.
5. 97 LTV Purchase Program
Backed by Fannie Mae and Freddie Mac, the 97 Loan-to-Value program is for first-time buyers or those who haven’t owned a home in the past three years. You’ll need just 3% down and can avoid upfront mortgage insurance fees.
- 3% down payment: One of the lowest available for conventional loans.
- No upfront insurance fee: Unlike FHA loans.
- PMI is cancellable: Once you reach 20% equity.
- Flexible down payment sources: Gifts, grants, and personal savings allowed.
You’ll need a minimum credit score of 620, and the loan must be for your primary residence.
6. HomeReady Mortgage
HomeReady is a Fannie Mae program designed for low-to-moderate income borrowers. It lets you include income from a roommate or boarder and offers low-cost mortgage insurance.
- 3% down payment: Great for first-time buyers.
- Boarder income allowed: Boosts qualifying power.
- Lower PMI costs: More affordable than FHA insurance.
- Closing cost help: Sellers can contribute up to 3%.
Income limits apply, and borrowers must complete a homeownership education course.
7. Home Possible Mortgage
Freddie Mac’s Home Possible program is similar to HomeReady but allows additional flexibility, including co-borrowers who don’t live in the home and options for multi-unit properties.
- Low down payment: Just 3% for single-family homes and 5% for multi-unit properties.
- Non-occupant co-borrowers allowed: Like a parent helping a child qualify.
- Lower PMI premiums: Can be canceled when equity reaches 20%.
- Flexible property types: Includes manufactured homes and up to four units.
Borrowers must meet income limits and complete homebuyer education if using certain features.
Special Programs and Assistance for Low-Income Buyers
These programs go beyond traditional loans to offer discounted homes, second loans, grants, and other forms of financial support that can make buying a home more realistic on a tight budget.
8. HUD Homes
HUD homes are properties that have been foreclosed on and are now sold by the Department of Housing and Urban Development. These homes are often priced below market value and can be paired with FHA loans.
- Discounted home prices: Often below market rate.
- $100 down payment option: When using FHA financing.
- First pick for buyers: Owner-occupants get priority before investors.
- Special incentives: Extra discounts for teachers and public servants.
These homes are sold as-is and may need repairs, so inspections are strongly recommended.
9. Good Neighbor Next Door Program
This HUD program offers 50% off the purchase price of a HUD home for eligible public servants who agree to live in the property for at least three years.
- Half-price homes: Big savings for teachers, police, EMTs, and firefighters.
- Primary residence required: Must live there for three years.
- Limited listings: Only available in designated revitalization areas.
- Application deadline: Bids must be submitted within seven days of listing.
You’ll need to verify your profession and eligibility through the HUD Homestore website.
10. State Housing Finance Agency (HFA) Loans
Every state has a housing finance agency that offers mortgage assistance to low- and moderate-income buyers. These loans often come with down payment assistance and below-market rates.
- Down payment and closing cost grants: Reduce upfront expenses.
- Competitive rates: Lower than many conventional options.
- Mortgage tax credits: Some states offer credits to reduce your annual tax bill.
- Programs for repeat buyers: Especially in targeted areas.
Eligibility rules, income limits, and property requirements vary by state. A quick visit to your state HFA site can show you what’s available.
11. Fannie Mae Community Seconds
Community Seconds lets you layer a second mortgage—often a grant or deferred loan—on top of your main loan to help with the down payment, closing costs, or renovations.
- Stackable financing: Combine two loans to reduce your upfront cash need.
- Forgivable loans available: Some don’t require repayment if you meet terms.
- Broad funding sources: From state agencies, nonprofits, or employers.
- Loan-to-value up to 105%: Covers more than just the purchase price.
This program must be paired with a Fannie Mae loan like HomeReady, and the second mortgage must come from an approved source.
Smart Strategies to Buy a Home With a Low Income
Homeownership is possible even on a limited income—you just need the right approach. These strategies can help you boost your chances of getting approved, reduce upfront costs, and find a loan that fits your budget.
1. Work With a Real Estate Agent Who Understands Low-Income Buyers
An experienced agent can help you find affordable homes, explain different loan options, and connect you with local assistance programs. They can also help you negotiate seller credits to reduce your out-of-pocket costs.
2. Use Low- or No-Down-Payment Loans
FHA, VA, and USDA loans are built for buyers who don’t have a large down payment saved. Some conventional options, like HomeReady and Home Possible, only require 3% down and offer flexible credit guidelines.
3. Focus on More Affordable Homes
Smaller homes, older homes, or properties in lower-cost neighborhoods can make your monthly payment more manageable. Look for homes that meet your needs without stretching your budget.
4. Apply for Down Payment Assistance
Most states offer down payment assistance through grants or low-interest loans. These programs can cover part—or even all—of your down payment and closing costs. Check with your state housing agency or lender.
5. Ask a Family Member to Co-Sign
A co-signer with strong credit and income can help you qualify for a better mortgage. The lender sees them as a backup source of repayment, which lowers the overall risk.
6. Improve Your Credit Score Before Applying
A higher credit score can mean lower interest rates and better loan terms. Check your credit report for errors, pay bills on time, and avoid new debt to improve your credit profile.
7. Save More for the Down Payment
Even a slightly larger down payment can lower your monthly mortgage and reduce the amount you need to borrow. It may also help you avoid mortgage insurance on some loan types.
8. Lower Your Debt-to-Income Ratio
Lenders want to see that you can handle monthly payments comfortably. Pay down credit cards, personal loans, or car payments to improve your debt-to-income ratio before applying.
9. Use a Gift Toward Your Down Payment
Many loan programs allow gifted money from a friend or family member. You’ll need a signed gift letter and documentation showing the transfer, but it can make a big difference when cash is tight.
10. Look Into Housing Vouchers for Homeownership
If you already receive Section 8 rental assistance, you may qualify for the Housing Choice Voucher homeownership program. It can help cover monthly mortgage payments, property taxes, and insurance.
11. Consider Rent-to-Own Opportunities
Some sellers offer rent-to-own contracts, where part of your monthly rent goes toward the eventual purchase price. These can help you lock in a home while you work on improving your finances.
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.
