Low Income Mortgage Loans

If you have a marginal income and think that owning a house is out of the question, think again. Low income mortgage loans are available in various forms to those who seek home ownership but don’t have an average size income. These low income loans are made available because third party organizations provide insurance to private lenders who originate the loans. This insurance protects the loan originator against possible default of the loan by the low income borrower.

For a non-military person, one of the best low income mortgage loans you can get is through the FHA or Federal Housing Administration. The FHA was created by Congress in 1934, during the Great Depression Era when there were massive foreclosure rates and banks were hesitant to provide mortgages. The FHA program helped get this Nation back on track issuing mortgage loans by providing lenders with sufficient insurance to protect their assets.

Today the FHA is part of HUD or Housing and Urban Development and has a mission of helping low to moderate income persons qualify for low income mortgage loans. The FHA assists lenders by reducing their risk in issuing loans by guaranteeing the loan against default by the borrower. Because of the FHA guarantee, these types of loans usually come with favorable interest rates.
To qualify for low income mortgage loans approved by the FHA, borrowers must have a reliable income, have a record of paying bills on time, have low long-term debt and have the ability to pay a monthly mortgage plus additional costs. The monthly mortgage payments cannot not exceed 31% of gross income and the monthly mortgage payment plus additional non-housing expenses, can total no more than 43% of income. A 3% down payment is usually required but this money can come in the form of a gift from family and friends.

For military personnel, the best low income loans can be found at the VA or Veterans Affairs department. Veterans of the United States Armed Services and National Guard are eligible for low income mortgage loans if they have served for a specified period of time and have been honorably discharged.

VA loans are not made by the Veterans Affairs Department. Instead, the VA assists private lenders who issue the loans by guaranteeing the loan against default by the borrower. A veteran can qualify for low income mortgage loans as long as he/she can show that they are able to pay for the loan. If the veteran has good credit they can usually get up to 100% financing of the purchase price of the home.

Another source of low income mortgage loans is through the RHA or Rural Housing Authority. The RHA is part of the United States Department of Agriculture or USDA. The RHA is a government organization that actually originates loans to low income homebuyers who qualify for the program. To qualify you must live in a rural area or farming region and show that you can make the payments on the loan that you are seeking and have a good credit rating.

With the resources listed in this article, I hope you now realize that you can qualify for a home loan mortgage even if you have a low income. You may not qualify for an expensive home, but you can still find your piece of the American Dream in a smaller package.