If you have a relatively low income and do not believe that you can own a house, I suggest you think again. Low income mortgage loans are available to certain individuals who want to own a home but don’t have a standard size income. Different private lenders provide these types of low income loans because they are insured against loss to the lenders who make these loans possible. If a low income borrower were to default on his or her loan the insurance company will protect the originator of the loan.
Three types of low income mortgage loans include the following: 1) FHA or Federal Housing Administration loans, 2) VA or Veterans Affairs loans and 3) RHA or Rural Housing Authority loans.
FHA loans are backed by HUD or the Housing and Urban Development department that helps individuals with low incomes qualify for mortgage loans. Because the FHA guarantees these loans you can usually get a good interest rate on this particular type of loan.
To qualify for a low income loan by the FHA a borrower must have a reliable source of income and a good track record of paying their bills in a timely manner. They must also have a low debt to income ratio. One criterion is that their monthly mortgage payments must not exceed 31% of their gross income. When you include non-housing expenses plus the mortgage payment these expenses cannot be more than 43% of the income. A 3% down payment is needed to get the loan but it is okay to get this money in the form of a gift from either family or friends.
If you have served in the military the best low income loan can be found with the VA. National Guard members in addition to regular US armed services personnel are eligible for low income mortgage loans as long as they have served their time fully and received an honorable discharge.
Again, the VA does not make mortgage loans. They simply insure the loans that are made by private lenders in case the borrower happens to default on the loan. Veterans are provided special privileges in that they can get up to 100% financing on the price of the home that they want to purchase as long as they can show that they have the income and stability to pay for the loan.
The final source of low income loans is through the RHA, which happens to be part of the US Department of Agriculture or USDA. In this case the RHA is a governmental organization that originates loans for qualified buyers. The primary qualification for this type of loan is that you must live in a farming region or rural area and prove that you are capable of making payments on time in addition to having a good credit rating.
The resources that have been listed in this article should give hope to those of you who are seeking the American dream but don’t have a big income to qualify for a standard rate loan. As long as you meet the minimum requirements in these loan packages you should still be able to find your slice of the American pie even though it may be a smaller slice.