Home Loans for Low Income Buyers

Even though current home values have been falling since 2008, people are still finding it difficult to purchase a new home. Many people today are only earning a low income, which could hinder the borrower’s ability to qualify for a new home. The good news is that there are plenty of home loans for low income buyers now. Home loans for low income buyers are specifically designed to qualify individuals for a mortgage that are earning a low income. There are different types of home loans for low income buyers that people should be aware of before choosing a lender.

The most notable lenders for low income buyers are Fannie Mae and Freddie Mac. These two lending institutions have made headline news over the past few years because of their financial troubles that they have been experiencing. Regardless of their history, these two lending institutions have helped millions of people afford a new home. Individuals who have lost their homes due to foreclosure have often done so due to poor judgment on the homeowner's behalf. For example, instead of choosing a low fixed rate mortgage loan, people who have gone through a foreclosure were mostly on variable rate mortgage payments and other balloon mortgage loans.

These types of loans may have had a low interest rate in the beginning, but after a set period of time the interest rates associated with these mortgages went up. The interest rates went up to a point to where it became a financial hardship on the homeowner. Low income buyers should do their research on the type of mortgage that will be right for them. In order to avoid the pitfalls of certain mortgages, low income buyers are highly advised to use a low income home mortgage that doesn’t have any surprises with interest rates at a later date.

An FHA home loan is a type of loan designed for low income buyers. FHA stands for Federal Housing Authority, which is designed to help those with a low income afford a new home. The FHA was first established in 1934, directly created from the National Housing Act. The reason why a low income buyer is able to qualify for an FHA loan is because these types of mortgage loans are insured. When a mortgage is insured, the risk that the low income buyer will present is effectively eliminated. Low income buyers who cannot qualify for a traditional mortgage loan will have the opportunity to use an FHA mortgage loan.

Another type of low income home mortgage loan is the RHA. RHA, or Rural Housing Authority, provides assistance to low income buyers. The RHA program is provided by the government. In fact, the RHA program is guaranteed by the USDA, which provides security against risky borrowers. Low income buyers are considered risky borrowers because the individual applying for the home loan isn’t making an income that provides a level of comfort when paying for the home loan. These programs are used to eliminate the risk while still providing housing for individuals.

The Veteran’s Administration is another program that is often used by low income buyers. The home loan is guaranteed by the Veteran’s Administration, but the borrower must be a veteran in order to use this low income buyer program. There are many benefits that the VA home loan provides people when buying a new home, like a no down payment. Not only do military veterans qualify for the VA home loan, the spouse of the veteran also qualifies for the VA home loan as well. Low income buyers have enough options made available to them to purchase a new home, regardless of their income.