How can I buy a house with a low income?

While a lower income might make you feel like it’s impossible to qualify for a home loan, that isn’t the case. There are plenty of things you could do, loans to consider and strategies that could help you get a mortgage despite a lower income.

If you are ready to begin the mortgage process with your current income, start with an online home loan application today.

Yes, you can still buy a house when you have a lower income.

If you have a lower income and are looking to purchase a home, there are a few things you could look at that might help you get a mortgage. Looking into mortgage options, assistance programs and strategies to increase borrowing power are some of the ways that could help you buy a house with a lower income.

For those with lower incomes, several mortgage options may help you become a homeowner. Here are a few mortgage programs that you may want to consider.

Fannie Mae’s HomeReady program is a great option for lower-income borrowers. HomeReady offers down payment options as low as 3%, which can come from gifts or grants, for borrowers whose income is at or below 80% of the median income in the area.

Home Possible* is Freddie Mac’s version of the HomeReady program. Home Possible’s goal is to help make homebuying available to lower- or moderate-income households.

FHA loans make homebuying accessible with credit score requirements as low as 520, as well as down payment options as low as 3.5%. These loans are only available on primary residences that meet FHA guidelines for safety and livability standards.

One of the biggest benefits of USDA loans is their 0% down payment option, meaning you can get a home loan without having to worry about making a down payment upfront. Of course, these loans are only available for homes in qualifying rural and suburban areas.

If you are considered low income, there are a few ways you could increase your mortgage borrowing power. Here are a few strategies you could consider.

Adding a co-signer or co-borrower to your loan could increase your borrowing power.

When you add either a co-signer or co-borrower, their credit, income and assets will be considered alongside yours when lenders look at your application. For potential borrowers with lower income, short credit history or a credit score not as high as they would like, a co-signer or co-borrower could help them qualify for a home loan.

One of the biggest differences between the two is that a co-borrower, as a co-owner, will have access to the loan amount and home equity, while a co-signer does not. Because of this, a co-borrower has an equal responsibility to make loan payments, but a co-signer is only responsible for repayment if the primary borrower defaults on payments.

A mortgage credit certificate (MCC) offers eligible first-time homebuyers the chance to remove a portion of the mortgage interest they pay from their federal taxes. While using an MCC does not reduce the amount you will owe upfront on your mortgage, it could save** you some money when it is time to pay taxes.

Your debt-to-income (DTI) ratio is a major factor in determining the interest rate that you could get on your home loan. A lower DTI ratio could get you a lower rate on your mortgage. Reducing any debts you have before getting a home loan could improve your DTI ratio and lower the amount of interest you pay on your mortgage each month.

There are many down payment assistance programs and grants for lower-income home buyers that could reduce the upfront cost of buying a home. While some down payment assistance programs will need to be paid back, grants tend to be forgivable when certain criteria are met.

Across all 50 states, there are many down payment assistance programs, including state and local grants.

If you are looking for local and state-funded grants, you can start by researching options in your state and area. You can also connect with a Loan Officer to learn more about grants you may qualify for.

If you have family or close friends willing to help you buy a home, gift funds for down payment and closing costs can be helpful for lower-income borrowers.

Using a gift for a larger down payment could lower the amount you need to borrow with a home loan. A lower amount borrowed would mean the amount you pay each month could be lower as well, making homeownership more affordable and increasing your borrowing power.

Before you begin your mortgage application, there are a few ways you can prepare your finances to help you.

A lower interest rate could lower your monthly mortgage payments, and one of the best ways you could qualify for a lower interest rate is by building up your credit score.

Making timely payments on bills, credit cards, loans or utilities is one of the most effective ways to build up your credit score. While you are working on building up your credit score, it is smart to avoid opening new credit accounts or applying for different loans.***

Lenders will want to know what your income is and where it comes from. Lenders will also ask for proof of income through bank statements, pay stubs or tax returns. Preparing and documenting all sources of income before your application could save you time when lenders ask and get you ready for your mortgage application.

When you are ready to get a mortgage, you can start with an online application through a trusted lender. Online applications will connect you with a Loan Officer who can answer your questions and help find the best home loan option for you and your financial situation.

Begin your mortgage today with an online home loan application.

*Eligible borrowers must make less than 80% of Area Median Income. Available for first lien conventional mortgages for purchase and no cash-out refinances of owner occupied primary residences including condos, co-ops, and manufactured homes with additional requirements. Minimum down payment and FICO score requirements apply. Homeownership education may be required depending on transaction details. Applicants subject to credit and underwriting approval. Additional restrictions apply.

**Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.

***Rate does not provide credit counseling or credit repair services.

All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Rate does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error-free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Rate. Rate its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.