The Best Home Loans for Low Income Buyers

Many people are not aware there are several mortgage programs designed to help low-income borrowers.

There are several types of mortgage programs specifically for low-income buyers.

In this article, we take a look at low-income home loan options and how to know if you’re eligible

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Home Loan Programs for Low-Income Buyers

Home Loans for Low-Income Borrowers

Min Credit Score

Down Payment

Max DTI Ratio

Income Limit

FHA Loan




No income limits

VA Loan


No down payment


No income limits



No down payment


115% of area median income

HomeReady /Home Possible Loans




 80% of area median income

Good Neighbor




No income limits

FHA Loans

FHA loans are a type of government-backed loan that is guaranteed by the Federal Housing Administration that requires just 3.5% down with a 580 credit score. Borrowers with a 500 or higher credit score may qualify with 10% down.

The maximum debt-to-income ratio for FHA loans can be as high as 50% making them a great option for low-income borrowers.

Speak to mortgage lenders and check current rates

USDA Loans

This program, formally known as Section 502, is now commonly called USDA loans. This low-income housing loan is meant to reach “low-to-moderate-income homebuyers,” which includes people living in suburban and small-towns.

USDA loans are specifically for low-to-medium income families. Your household income cannot be more than 115% of the average area median income to qualify.

VA Loans

A VA loan is a no-money-down mortgage program available to members of the US military and surviving spouses. These loans have no maximum DTI requirements and do not require mortgage insurance. A VA home loan is the cheapest way to become a homeowner as a Veteran.

You don’t have to have perfect credit—even bankruptcy isn’t an automatic disqualification. A DTI ratio as high as 50% is possible.

HomeReady Loans

Fannie Mae created the HomeReady loan program specifically for low-income first-time homebuyers. HomeReady loans do have income limits; your income cannot exceed 80% of the area median income (AMI) to be eligible. You can use the income of family members or anyone living in the home with you.

Home Possible Loans

The Home Possible Loan program from Freddie Mac is very similar to the HomeReady program. Only first-time homebuyers with income below 80% of the area median income are eligible. A 620 credit score and a 3% down payment are required.

ReadyBuyer™ Loans

The HUD HomePath mortgage program by Fannie Mae is available from many lenders in the US and represents a genuinely innovative approach to home underwriting.

It considers the income of everyone living in the house as part of the qualification process. This helps you by increasing your debt-to-income ratio using everyone in the household without being on the mortgage.

With the ReadyBuyer HomePath mortgage, you can purchase any HUD home on the HUD HomeStore website with just a 3% down payment. HomePath will also give you a 3% credit you can put towards closing costs after attending a mandatory homebuyer education course.

Good Neighbor Next Door Program

The Good Neighbor Next Door program provides homes for 50% off for teachers, firefighters, police officers, and EMT’s. A $100 down payment is all that is required for this first-time buyer program.

HUD Dollar Home Program

When a home is foreclosed on, and the borrower used an FHA loan to purchase it, it is listed on the HUD website. If, after six months, the home is still not sold, HUD  will sell the home to local governments for $1 that they can offer to low-to-median income families.

Local governments can then work with nonprofit homeownership organizations to offer homes to low-income families to revitalize a community.

Only homes with a market value of $25,000 or less are eligible for the Dollar Home Program.

First-Time Homebuyer Programs and Grants

The HUD website has various grants and programs for first-time buyers and low-income families. Local City and County websites sometimes also have first-time homebuyer and down payment assistance programs.

Check out your local county website to check for any low-income housing assistance programs, down-payment assistance, and grants.

The Down Payment Gifts

low income home loans

The good news is that all of these mortgage programs we discussed allow you to use gift funds for the down payment. A friend or relative can gift you 100% of the down payment amount you need for the loan.

The Donor will need to show documentation for where the gift came from and provide a gift letter stating they do not expect to be reimbursed or repaid for the money they are giving.

The Bottom Line

Purchasing your dream home may be more reachable than you think.

There are plenty of low-income home loan programs that help families become homeowners. Homebuyer grants, programs, and down payment assistance services are also available from different sources.

If you want to purchase a home but are worried you will not qualify because of your income. No need to fret; there are many options for you.