Those with disabilities and disability income can qualify for these special home buying programs as well as standard mortgage loans.
Qualifying for a mortgage with disability income
Life hasn’t always been easy for Christine LaCroix of Voluntown, Ct. She was born without a left hand, and then she injured her right arm. She went through a divorce and had to sell her house in 2008. Two years later, her fourth child was only six weeks old when their home flooded in Rhode Island. She lost everything, and they became homeless for more than two months.
But now, LaCroix, her second husband and their five children recently moved into a 3,000 square foot home of their own that she calls her “dream home.” The only way they could succeed at getting this house was from help from the Connecticut Housing Finance Authority’s program for those with disabilities called Home of Your Own Program (HOYO).
It’s tough enough buying a house no matter who you are. But what about if you are living on disability? Is it possible to buy a house?
How can I qualify for a mortgage with disability income?
There are programs out there that can help you get through the process, guide you to the right lender, possibly give you down payment assistance, and possibly give you an interest rate below market rate. It won’t be an easy road as LaCroix admits.
“It’s all worth it though. We were living in a 700 square feet house with 7 people and three dogs. The program we went through was awesome. This was a short sale, but it took 10 months to complete,” she says. “When you have a disability, it’s really hard to save money. This program did wonders for us.”
According to the U.S. Department of Health & Human Services, 54 million people in the United States are living with a disability – that’s one in every five. And to make things even tougher for those with disabilities, the median income of non-institutionalized persons ages 21-64 years with a disability is $36,400. That statistic was calculated by Cornell University Employment and Disability Institute. With a salary that low, it won’t be easy to qualify for a mortgage without a lot of help.
“If someone’s sole source of income is social security disability, it would be hard to save money for a down payment,” says Brian Sullivan, spokesperson for the U.S. Department of Housing and Urban Development in Washington, D.C. “The first rule of thumb if you are buying a first home whether on disability or not is to undergo some counseling. I know when I bought my first house, I didn’t have a clue. I learned the hard way about homeownership.”
LaCroix said the counseling was a 2 ½ hour workshop that was very informative. She is among more than 90 families who secured an affordable mortgage and became homeowners in Connecticut since the HOYO program began in 1995, says Norbert Deslauriers, vice president of Single Family Mortgage Programs for HOYO.
“The program offers home loans at below-market interest rates (usually a whole percentage below) to people with disabilities who wish to purchase their first home. CHFA sells tax-exempt bonds and uses the investment money to pass on in the form of lower interest rates for our clients,” he says. “It allows those with disabilities to get into a home that they might not have been able to get in.”
Qualifying candidates must have certain income levels, be a first-time home buyer or someone who has not owned a home in three years, and a person in the home has to have a disability. The term is a 30-year fixed loan.
Other housing programs for people with disability income
What other options are out there for those on disability to buy a new home?
Habitat for Humanity
Habitat for Humanity has been helping those with disabilities for decades. On the non-profit organization is committed to specially adapted housing. Their website reads, “When possible, Habitat house incorporate basic accessible design features, such as zero-step entrance and wide passage doors and hallways. Houses built in partnership with families with disabilities include additional accessibility features.”
Most larger metropolitan areas have a Habitat branch. Call them to find out if you could be eligible for a new house or help in any other way.
But it’s not just special housing programs that are available to those with disabilities. Common mortgage types like conventional loans, FHA loans (backed by the Federal Housing Administration), and VA loans (backed by the Department of Veterans Affairs) allow borrowers to use disability income to qualify for the mortgage.
If the income is non-taxable, the borrower can even add an additional 25% to their income to help them qualify. Many borrowers qualify for standard loans using their disability income alone.
Fannie Mae Community HomeChoice Program
For those who can’t, other specialized loan programs are available. Fannie Mae offers the Community HomeChoice Program, a mortgage program to help low- and moderate-income people with disabilities and the able-bodied people who care for them. The minimum credit score for a single-family home is 680, and you don’t need any reserve requirements.
“I have been told that many of the components of this program have become part of our general selling guide,” says Keosha Burns, senior manager of media and external relations for Fannie Mae. “So many of the ways we are helping this community through this program have become common practice.”
Homeownership Voucher Program
HUD also offers the Homeownership Voucher Program through local public housing authority offices or PHA. These vouchers help disabled and low-income families get their own homes. They offer financial assistance by subsidizing monthly mortgage payments or rent through vouchers.
“Since 2004, we have helped 11,000 people with homeownership. That’s not a very large slice of the pie,” says Sullivan. “There is a lot of policy squabbling about who should be a homeowner. It is a challenge for low-income people to buy a house. It’s not just about making the down payment. But they have to pay home insurance and taxes.”
He suggests people check into all kinds of home buyer’s assistance programs that help with closing and down payment assistance. Checking with your local unit of government might also turn up special homeownership programs in certain neighborhoods or towns that can assist with your home purchase.
“After the mortgage crisis, who has 20 percent to plop down on a home? And for those on disability, it would be tough. But I’m not saying it’s impossible,” Sullivan says.