How To Buy a House With Low Income

You may have more options than you think

A couple sitting and chatting at a kitchen table in a new home
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If you're in the market to buy a home and you're not a high-income earner, you know how impossible it can seem to make your homeownership dreams a reality. It may also feel like those dreams are slipping further and further out of your grasp. Home prices have been rising three times faster than income since the 2008 financial crisis, according to a recent 2021 study.

However, it's not all bad news. A potentially surprising number of programs and mortgage options are available to help prospective homebuyers who earn less than certain income thresholds.

Key Takeaways

  • Many programs are available to help lower-income people buy homes.
  • There isn't a single definition of "low income.” Instead, each program to help low-income homebuyers defines its own eligibility criteria.  
  • Check with your state's housing finance agency and your local public housing agency to learn more about special opportunities and programs that can help you buy a home.

Can I Buy a House With Low Income?

Yes, it's possible to purchase a home when you earn a low income. You'll face two specific challenges:

Most homebuyers will face these hurdles, but they can be a lot taller if you're not earning a lot of money, especially relative to the cost of living in your area.

Luckily, there are strategies for buying a home on a low income. Plus, many resources are available to you that aren't offered to higher-income earners.

Defining ‘Low Income’

There isn't any one standardized definition of "low income." It's more of a relative term, and many people take it to mean annual earnings that are less than the median income.

In the United States, the estimated median family income is $90,000 for 2022, but even that doesn't tell the full story. The cost of living and how much people are paid varies widely around the country. For example, in 2020, median household income in San Francisco was $119,136 compared to $53,329—less than half as much—in Yavapai County, Arizona.

When it comes to qualifying for programs designed to assist people earning low incomes, the definitions vary. Each program typically publishes a chart showing what counts as "low income" based on its own criteria, often depending on family size and geographic location. For example, the USDA offers home loans for low-income rural residents using income limits based on the county and the number of people in the household.

Tips for Buying a House With Low Income

Homeownership should be available to everyone who wants it, regardless of income. Start by preparing your finances (and emotions) for the homebuying process:

  • Work to improve your credit score
  • Consider your budget and how a mortgage payment would fit into it
  • Pay down other debt
  • Start saving for a down payment and closing costs

At the same time, follow the tips below to reach your goal of buying a home.

The Balance’s comprehensive checklist can help you think through all the steps involved in this complex process.

Look Into Low-Income Mortgage Options

Many programs are available to help make homeownership possible for people who earn low incomes. Each low-income mortgage program and first-time homebuyer program has different features that can make it easier to buy a house, depending on your situation. Some of the options include:

  • FHA loans: These feature down payments as low as 3.5%, with easier-to-meet credit requirements.
  • VA loans: No down payment or private mortgage insurance is required, and they often have lower interest rates than other types of loans.
  • USDA loans: No down payment is required for low-income residents in rural areas. 
  • HomeReady, HomeOne, and Home Possible loans: These loans are from Fannie Mae and Freddie Mac and are geared specifically toward lower-income borrowers. Both loans feature a down payment requirement of just 3%.

Consider Homebuying-Assistance Programs

Many other programs are designed to help with other challenges in buying a house, such as putting together your down payment and finding an affordable home to buy.

  • Your state's housing finance agency: Each state operates a housing finance agency with programs available to help people buy homes, such as special low-income mortgage programs, down payment assistance, and more. You can connect with your state's housing finance agency through the National Council of State Housing Agencies.
  • HUD Good Neighbor program: Firefighters, police officers, teachers, and EMTs are eligible to purchase certain homes at a 50% discount if they agree to live in the homes for three years in revitalizing communities.
  • HUD Housing Choice Voucher: This voucher helps low-income families afford ongoing costs of homeownership, including mortgage payments, utilities, maintenance, and more. These vouchers are available through certain public housing agencies in specific areas.
  • 211.org: Many homebuying-assistance programs are offered through scattered organizations and resources across the country, and it can be tough to know what's available. If you need help, call 211 or visit 211.org to connect with a United Way volunteer in your area who can help you find local programs that you might qualify for.

Consider Buying a Condo or Townhome

If you don’t need a yard or you prefer living in a community with shared walls, consider buying a condo or a townhouse instead of a detached house. Nationwide, the median condo and co-op sales price was 16% less than that of single-family homes in 2021, according to the National Association of Realtors.

Consider Moving to a Lower Cost-of-Living Area

Not everyone is able to pick up and move, or wants to do so. But if you'd be happy elsewhere, where the cost of living may be cheaper, you may be able to afford a home sooner. You might think about moving to a different neighborhood, a suburb, or even another state.

Consider a Co-Signer

Asking someone with good credit to be a co-signer on your loan can boost your odds of approval, get you a better rate on your mortgage, and make your mortgage payments more affordable. However, this is a big request because the co-signer could become responsible for paying the mortgage if you're not able to. Make sure you consider this option carefully before committing.

The Bottom Line

Don't give up your homeownership dreams if you're not a high-income earner. There are ways to buy a home when you earn a low income. You'll just need to get a bit more creative with finding the right options for your situation.

Frequently Asked Questions (FAQs)

What credit score do you need to buy a house?

You can qualify for an FHA loan with a credit score as low as 500 if you're able to make a 10% down payment. However, for conventional mortgages, most lenders are looking for a credit score of 620 or higher. The higher your credit score, the better your odds of approval. You'll also typically receive a lower interest rate, which saves you money and makes your payments more affordable.

Can you buy a house with no money down?

Mortgages with no money down aren't usually available to the general public. However, there are a few exceptions. VA loans are available for military members and veterans, and don't require a down payment. If you're in a rural area and you meet certain guidelines, you may qualify for a USDA loan with no down payment.

How much do you need to save to buy a house?

Most people will need a down payment of at least 3%. If you're a veteran or a military member, you may qualify for a VA loan with no down payment. Keep in mind that not having a down payment means you'll be taking out a larger loan and you may have to pay for private mortgage insurance (PMI), both of which will make your monthly payment more expensive.

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Article Sources

  1. Real Estate Witch. “U.S. House Prices Are Rising Exponentially Faster Than Income (2021 Data).”

  2. U.S. Department of Housing and Urban Development. “Estimated Median Family Incomes for Fiscal Year (FY) 2022,” Page 5.

  3. U.S. Census Bureau. “QuickFacts: Yavapai County, Arizona; San Francisco City, California.”

  4. U.S. Department of Housing and Urban Development. “Let FHA Loans Help You.”

  5. Freddie Mac. “Home Possible.”

  6. Fannie Mae. “HomeReady Mortgage.”

  7. National Association of Realtors. “National Existing Home Sales.”

  8. U.S. Department of Housing and Urban Development. “FHA Single-Family Housing Policy Library,” See “4000.1: FHA Single Family, II. Origination Through Post-Closing/Endorsement, A. Title II Insured, 2. Allowable Mortgage Parameters, b. Loan-to-Value Limits (02/16/21).”