Best Low-Income Home Loan Mortgage Lenders

How much money do you need to buy a home? While this is a question many potential homebuyers ask themselves, there is no set dollar amount you need to earn to buy a home. If you’re living on a limited budget and you assume that you don’t earn enough to qualify for a mortgage loan, read on — you might be surprised to learn about how many options are available for buyers with lower incomes.

Quick Look: Best Low-Income Home Loan MortgageLenders

• Best for Flexible Credit Requirements: FHA Loans
• Best for Low Down Payment: Fannie Mae HomeReady Loans
• Best for Home-Buyers in Rural or Suburbian Areas: USDA Loans
• Best for Comparing Low-Income Home Loan Options: Angel Oak Mortgage Solutions
• Best for Flexibility: CrossCountry Mortgage

Best Mortgage Lenders for Low-Income Home Loans

You're ability to secure a low-income home loan option can depend on a variety of factors - from location to your personal finances. Nevertheless, here are the top five low-income home loan options that you should consider.

1. Best for Flexible Credit Requirements: FHA Loans

FHA loans are backed by insurance from the Federal Housing Administration. These loans were created to help buyers with less substantial credit history or past credit mistakes buy a home. The FHA lending program does not set a minimum income level you must meet to qualify for a loan, which means you can potentially get approved with less money coming in. However, you will need to meet the following criteria:

• A FICO credit score of at least 580
• Proof of steady, consistent and ongoing income using a W-2 or other tax document
• A down payment of at least 3.5% of the purchase price of your new home
• A debt-to-income ratio (DTI) of 50% or less
• Buying a home that’s in livable condition at the time you move in
• Using the home as your primary residence

Some FHA lenders also allow you to buy a home with an FHA loan and a credit score as low as 500. However, if your score is less than 580, you will need at least 10% down to close on your loan. 

Why We Love It: The FHA provides options for refinancing and renovation loans, such as the FHA 203(k) program, which can help low income borrowers finance the purchase and renovation of a home in one loan.

2. Best for Low Down Payment: Fannie Mae HomeReady Loans

Fannie Mae is a federal mortgage agency that launched the HomeReady program in 2015 to provide lower-income buyers with a more flexible option to finance their first home. The HomeReady program makes it easier to get a home loan when you have a lower income because the loan application allows you to add nonborrowing co-inhabitants to the loan. By adding co-borrowers who live in your home to your loan application, the HomeReady plan gives you a more flexible way to qualify if you have a lower income on your own, but you live with others who contribute to household expenses.

To qualify for a mortgage loan through the HomeReady program, you must meet the following criteria:

• Have a debt-to-income ratio of no more than 50%
• Be moving into the home you’re buying as a primary residence
• Complete a four- to six-hour online homeownership course
• Have a credit score of at least 620 points

The HomeReady program was designed for buyers with lower income levels. You cannot earn more than 80% of your Census tract’s median income. Verify that your income qualifies you for a loan based on your location using the Census’s calculator before you apply. Simply click on your county to view the maximum income you can earn and still be eligible for a HomeReady loan.

Why We Love It: Fannie Mae HomeReady Loans offer competitive interest rates, low down payment options as low as 3%, and flexible credit score requirements as low as 620, making them accessible to individuals with limited financial resources or less-than-perfect credit histories. Fannie Mae also offers homebuyer education resources and tools to help borrowers navigate the home buying process efficiently.

3. Best for Home-Buyers in Rural or Suburbian Areas: USDA Loans

If you’re looking to buy a home in a rural area, you may want to consider applying for a USDA loan. USDA loans have insurance from the United States Department of Agriculture and can be used to buy a home in a suburban or rural part of the country. Use the USDA’s evaluation map to determine whether the home you want to buy is in a qualifying area. If it is, you could qualify for a mortgage with $0 down.

To qualify for a USDA loan, you must meet the following criteria:

• The home you’re buying must be in livable condition, meaning it must have functional utilities, water and a sound structure.
• Your household income must fall within USDA limitations for your area
• A credit score of 640 or higher (though the exact requirement may vary by lender)
• A DTI ratio of 43% or less

Why We Love It: The USDA Rural Development Loan program specifically caters to individuals in rural and suburban areas who have low to moderate incomes, providing them with opportunities to achieve homeownership with low or even zero down payment options. Additionally, the USDA offers competitive interest rates, affordable mortgage insurance, and flexible credit requirements, making homeownership more attainable for those with limited financial resources.

4. Best for Comparing Low-Income Home Loan Options: Angel Oak Mortgage Solutions

Angel Oak Mortgage Solutions is a full-service mortgage lender offering traditional and portfolio non-qualified mortgage loans. Angel Oak is licensed in 45 states and offers competitive rates and quick closing times. You can access mortgages for primary, second home, or investment properties. A variety of home loans are allowed, including single-family, townhomes, and condos. Even non-warrantable condos are allowed.

There are competitive rates on conventional purchases and refinance, as well as flexible down payment options. Plus, there are no tax return options for self-employed borrowers and real estate investors. There are also 1099 income options available for self-employment individuals.

Perhaps best of all, Angel Loak Home Loans is a qualified lender for government loan products, including FHA, USDA, and VA loans.

Why We Love It: Angel Oak Mortgage Solutions offers programs such as non-qualified mortgage (non-QM) loans, which are designed for individuals who may not meet traditional lending criteria but still have the financial ability to repay a mortgage. Additionally, Angel Oak Mortgage Solutions provides flexible underwriting guidelines that take into account factors such as bank statements, rental history, and overall financial stability rather than just relying on credit scores.

5. Best for Flexibility: CrossCountry Mortgage

CrossCountry Mortgage helps all types of homebuyers get approved for a mortgage and is one of the best local mortgage lenders. Their flexible requirements can help you get financing, with no employment or income verification and no minimum DTI. CrossCountry Mortgage offers traditional loan terms, as well as more flexible home payment plans with its 40-year mortgage program. Plus, they offer VA loans and FHA loans.

CrossCountry Mortgage removes some barriers for self-employed borrowers. Tax returns are not required and you'll only need one year of self-employment income history along with a minimum credit score of 580. With CrossCountry Mortgage, you may also be able to get approved on your assets, such as stocks, bonds or retirement accounts.

CrossCountry Mortgage is licensed to lend in California, Colorado, Connecticut, DC, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia, and Washington.

Why We Love It: CrossCountry Mortgage has a team of experienced loan officers who are knowledgeable about various assistance programs and resources available for low income borrowers, guiding them through the mortgage process with personalized support.

What Are Low-Income Home Loans?

Low-income home loans, also known as affordable housing loans or subsidized mortgages, are financial assistance programs designed to help individuals and families with low income levels achieve homeownership. These low-income home loans aim to provide affordable options for individuals who may not qualify for traditional mortgages due to their low income.

These loans often have eligibility requirements based on income limits and may offer reduced interest rates, lower down payment requirements, or other favorable terms to make homeownership more accessible for low-income borrowers. The goal of these mortgage programs is to promote housing affordability and stability for individuals and families with limited financial resources.

How to Choose a Low-Income Home Loan Provider

Remember to carefully review and compare all the terms and conditions before committing to a low-income home loan mortgage provider. It's essential to choose a lender that not only offers favorable terms but also understands and meets your specific needs as a low-income borrower. Following these tips can be a good place to start. 

Research and Compare Lenders

Start by researching different lenders that offer low-income home loan programs. Look for lenders who specialize in affordable housing or have specific programs designed for low-income borrowers. Compare their loan products, interest rates, fees, and eligibility requirements.

Assess Loan Programs

Evaluate the specific loan programs offered by each lender. Look for programs that cater to low-income borrowers, such as FHA loans, USDA loans, VA loans (if you're a qualifying veteran), or local/state government-sponsored loan programs. Consider the features and benefits of each program, including down payment requirements, interest rates, and flexibility in credit requirements.

Determine Whether You Qualify

Review the eligibility criteria for each lender and loan program. Assess the income limits, credit score requirements, and any additional qualifications needed. Make sure you meet the requirements for the programs you are considering to avoid wasting time on lenders who may not be a good fit.

Seek Out Assistance

Reach out to housing counseling agencies or non-profit organizations that provide assistance to low-income borrowers. These organizations can provide guidance, resources, and information about reputable lenders in your area that cater to low-income borrowers. They may also offer workshops or educational materials to help you understand the loan process better.

Evaluate Customer Service

When deciding on a lender, one of the most important features to consider is customer service. Read reviews and testimonials from past borrowers to get an idea of their experiences. Look for a lender that is responsive, transparent, and willing to answer your questions throughout the loan application process.

Obtain a Pre-Approval

Once you have narrowed down your options, consider getting pre-approved for a loan from a couple of lenders. This process involves submitting your financial documents and having the lender assess your creditworthiness. Pre-approval will give you a better understanding of the loan amount you qualify for and the terms you can expect, including closing costs.

Consult with Professionals

If needed, consult with a mortgage broker or a financial advisor who specializes in low-income home loans. They can provide personalized guidance based on your financial situation and help you make informed decisions.

Choose the Best Low-Income Mortgage

Finding the best low-income home loan mortgage lenders is crucial if you are looking to achieve your dream of owning a home. These lenders understand the unique financial circumstances of low-income borrowers and offer specialized loan options that make homeownership more accessible. By partnering with these lenders, you can benefit from lower interest rates, flexible down payment requirements, and personalized assistance throughout the application process.

These lenders play a vital role in promoting affordability and equality in housing, allowing low-income individuals like you to build wealth and create stability for yourself and your families. Ultimately, choosing the right lender is an essential step towards achieving the goal of homeownership and improving financial well-being.

Frequently Asked Questions