Low Income Home Loan

Low income home loans are more of a possibility in the U.S. when the government steps in to insure or guarantee loans with a low down payment. These can be obtained through the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA) or the U.S. Department of Agriculture's Rural Housing Services (USDA-RHS). These low income home loans make it possible for many families to enjoy the benefits of home ownership: security, a valued investment, financial benefits, tax deductions, and community stability. Plus, they do not require a 20 percent down payment. With federal insurance, one does not need a down payment of 0-5% of the home value because the government is acting as the guarantee for the low income home loan. Fannie Mae, Ginnie Mae, and Freddy Mac are nicknames of federal investment programs.

This type of financing with FHA insurance is available to anyone, but the VA mortgage guarantee program is specific. It only applies to qualified, eligible veterans and reservists. The USDA Rural Housing Service is only applicable when a person is building or buying homes in rural communities. Each of these three programs are uniquely targeted with restrictions that define the use. Buyers should interview several lenders to find the most reliable and cost effective way to use federally backed low income loans. If the chosen financing does not fit into these categories, private mortgage insurance is also available and required by lenders to safeguard their investments. Low income home loans insured privately do not have a pre-set limit on the size of the loan and there can be many other differences---which is why it pays to shop and compare with lenders. No one desires for a low income home loan to be issued when keeping a dream will only end in the heartache of default. The Psalms say that that God will make the wilderness fertile where "he maketh the hungry to dwell, that they may prepare a city for habitation." (Psalm 107:36)

To qualify, a person will need to have a regular sustaining income, good credit, a house that is as valuable as the financing, and sufficient cash to cover a down payment, closing costs, and perhaps a cash reserve equal to two monthly mortgage payments. When applying for a low income home loan, lenders want to be certain that the person can afford monthly housing costs which include the mortgage Principal, Interest, Taxes, and Insurance or (PITI). Even though all programs differ, this is the affordability factor. For FHA loans, this cannot exceed about 29% of the total income. If a person factors in a long-term debt along with the PITI, the FHA maximum allowable debt will be 41% of the gross monthly income.

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