Top Tips for How to Buy a House with Low Income

Key takeaways: 

• There are several options, loans, and assistance programs that make it possible to buy a house with low income. 
• Take steps to improve your chances of qualifying for a mortgage by building credit, paying down debts, and saving for a down payment.
• Compare loan types and speak with a lender to come up with a plan that works for your situation. 

Buying a home can seem out of reach for many people, but even with a low income, homeownership is possible. There are many loan options and assistance programs made specifically for low-income buyers. In this article, we’ll breakdown some of the options as well as help you strategize with tips for how to buy a house with low income. 

Regardless of whether you’re in a Miami apartment, a Nashville rental house, or hoping to buy a home in Tucson, we’re with you every step of the way. Begin your journey to homeownership with Redfin. 

Can I buy a house with low income? 

Yes, you can absolutely still buy a house with low income. Low income is generally defined as being below a specific threshold of the area’s median income (AMI), which can vary by location and employment. Each loan option we’ll discuss has qualification requirements for AMI, as well as other factors like credit score and debt-to-income ratio (DTI). 

As long as you meet the specific requirements and can reasonably afford the mortgage, taxes, and other monthly payments, you can still get a mortgage for a house with low income. 

How to buy a house with low income

There are a few things you can do on your own to improve your chances of qualifying for a loan and buying a house with low income:

• • Improve your credit score: A higher credit score makes you more likely to get favorable loan terms from a lender. Make payments on time, avoid opening new lines of credit, and pay down debts to improve your score. 
  • Do some financial planning: Know how much you can afford with your current budget. Be aware of your current DTI, credit score, and down payment savings amount when you speak to a lender so they can help direct you to the best loan option. 
  • Save for a down payment: Not all loans for low-income buyers require large down payments, but the more you’re able to save, the better. A bigger down payment can save you from paying for private mortgage insurance (PMI) on conventional loans. 
  • Pay down debts: Reducing your debts can both increase your credit score and lower your DTI, which will look good to lenders when you’re ready to apply for a loan. 
  • Work with a real estate agent: A good agent can help you understand the current housing market, maximize your budget, and find the right loans and assistance programs to look into in your area. 
  • Consider a co-signer or co-buyer: Buying a house with a friend or co-buyer is a great way to pool resources and break into homeownership with a low income. If you prefer not to have a roommate, a co-signer with good credit and a stable income can improve your chances of qualifying for a loan. A co-signer agrees to cover for you if you can’t pay your mortgage on time. 
  • Research first-time homebuyer programs and loans: We’ll dive into some of the most common loan and assistance programs for low-income buyers below. 

Loan options for low-income buyers

There are several loan options for buying a house with low income. The table below offers a quick glance at each one. Click on a loan to jump to more information: 

HomeReady by Fannie Mae

The HomeReady loan by Fannie Mae is a type of conventional loan with flexible terms. It offers a $2,500 borrower credit toward the down payment or closing costs of a home, and considers positive rent payments towards loan eligibility. While you will need to pay PMI, you have the ability to cancel it once you reach 20% equity. A homeowner’s education course is also required to qualify for this loan. 

• Credit score: 620
• Down payment minimum: 3%
• DTI: 43%-50% in some cases 
• AMI: 80% or less

Home Possible by Freddie Mac

Freddie Mac’s Home Possible loan is a conventional loan similar to HomeReady. It offers affordable mortgage insurance and flexible sourcing for down payments, including gift funds and employer assistance programs. A homeowner’s education course is required for this loan as well. 

• Credit score: 620-660
• Down payment minimum: 3% 
• DTI: 43% or less
• AMI: 80% or less

FHA loans

A Federal Housing Administration (FHA) loan is a flexible alternative for those who don’t meet the requirements for conventional loans. Homes purchased with FHA loans must be FHA-approved, but this ensures that your investment is long-lasting. Proof of steady income is required to qualify for this loan. 

• Credit score: 580 with a 3.5% down payment, less with a 10% down payment
• Down payment minimum: 3.5%
• DTI: Below 43%-50%
• AMI: No requirement 

HFA loans 

Housing Finance Authority (HFA) loans are offered through Freddie Mac and Fannie Mae in partnership with non-profit state housing authorities. The property bought with this loan must be a primary residence, and a homeowner’s education course is also required. 

• Credit score: 620
• Down payment minimum: 3%
• DTI: 45% or less
• AMI: Varies by location and program

USDA loans 

United States Department of Agriculture (USDA) loans are government backed and made to help low-income borrowers buy homes in specific rural areas, and some suburban areas. This loan typically requires a credit score of 640, but there is no official minimum and no down payment required. There are upfront and annual fees associated at a percentage of the home’s value, but this can be offset by savings on mortgage insurance and down payment. 

• Credit score: Typically 640
• Down payment minimum: 0%
• DTI: 40%-55% 
• AMI: Cannot exceed 115% 

VA loans 

Veterans Affair (VA) loans are only for eligible veterans, active-duty service members, and their surviving spouses. Interest rates for these loans are lower, and they don’t require a down payment. However, a VA funding fee is required, which varies depending on down payment amount and whether this is your first VA loan. This fee is typically paid once, and supports the VA home loan program. 

• Credit score: Typically 620, but no minimum required
• Down payment minimum: 0% 
• DTI: 41% or less
• AMI: No requirement 

Using an assistance program to buy a house with low income 

Using a down payment assistance program can offer extra support when buying a house with low income. There are a number of options both nationally and locally to explore. 

Good Neighbor Next Door

The U.S. Department of Housing and Urban Development (HUD) has the Good Neighbor Next Door program. This program offers a 50% discount off the listing price of a HUD home in revitalization areas to law enforcement officers, teachers, firefighters, and emergency medical technicians. If you meet the program’s requirements and agree to live in the home for three years, it can be a great way to save significantly on a home as well as contribute to a growing community. 

Housing Choice Voucher 

The Housing Choice Voucher (HCV), or Section 8, helps low-income families afford rent with rental vouchers. Some areas also have a homeownership option in which families can use their vouchers to buy a home instead of continuing to rent. Ask your local housing authority for information and requirements to qualify for this program if it is offered in your area. 

State and local assistance programs 

There are many other types of housing assistance programs offered through local and state agencies. Down payment assistance options, mortgage credit certificates, special financing offers for specific types of homes are all available in different areas. Your local housing authority can show you what is available near you and how to qualify for different options. 

Learning how to buy a house with low income opens doors

With so many financing options and assistance programs available to low-income individuals, you could be closer to homeownership than you thought. From intentional financial management to utilizing national and local assistance programs, you can learn how to buy a house with low income and start building equity on a lifelong dream today. 

Low-income buying FAQs

What is the minimum income required to buy a house? 

The minimum income to buy a house can vary depending on the type of loan you use and the area’s median income (AMI). For some loans designed for low-income buyers, there are requirements for what percentage AMI you can exceed. Check the AMI and calculate the cost of living for the area you want to buy in to determine the best fit for your income. 

Can I get a mortgage with a low income? 

Yes, you can still qualify for a mortgage with a low income. Many lenders offer loans that are specifically designed to help low-income borrowers afford homes. Even if you aren’t ready to buy a house, talk with a few different lenders to compare and understand the financing options. You can also look into down payment assistance programs to help lower costs. 

What credit score do I need to buy a home? 

Generally, the higher your credit score, the better your chance of securing a loan with favorable terms. However, some loans, like FHA loans, accept credit scores at 580 or lower in certain cases. Boost your credit score by making payments on time, paying down debts, and refraining from opening new lines of credit when you’re ready to buy a house. 

Can I buy a house with no money down? 

Yes, you can buy a house with no down payment. VA loans and USDA loans are the two most common loans to offer 0% down payment. These can be difficult to qualify for, but there are other options you can look into. Regardless of whether you qualify, it’s important to consider the pros and cons of a 0% down payment before making the decision. They can save you money upfront, but end up costing you more in interest and monthly payments. 

Can I use both a first-time homebuyer loan and a down payment assistance program?

It is possible to combine first-time homebuyer loans with down payment assistance programs. In fact, many loans for first-time buyers already offer down payment assistance as one of the benefits of the loan. Using both can give you access to more financial aid that will make homeownership more affordable, even with a low income.

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