Low-Income Home Mortgage: Programs and Requirements
Having a low income doesn’t automatically disqualify you from buying a home. In fact, there are many home loans for low-income borrowers that can put homeownership within reach. Depending on other important factors — like your credit score, existing debt, location and profession — you may qualify for a mortgage through one of the low-income home mortgage programs detailed below.
- Home loans for low-income homebuyers include conventional loans, FHA loans, VA loans and USDA loans.
- Eligibility guidelines, including down payment and credit score requirements, vary by loan type.
- Some states offer homebuyer assistance programs that loan or give homebuyers funds to cover their down payment and/or closing costs.
At a glance: Home loans for low-income borrowers
| Program | Biggest perks | Who it’s best for |
|---|---|---|
| Fannie Mae HomeReady® loans | Down payment as low as 3%, reduced mortgage insurance | Low-income buyers who are struggling to come up with a down payment |
| Freddie Mac Home Possible® loans | Down payment as low as 3%, reduced mortgage insurance | Low-income buyers with limited down payment funds and a 660 credit score or higher |
| FHA loans | Down payment as low as 3.5%, flexible credit requirements | Buyers with a credit score under 620 |
| Good Neighbor Next Door | Home purchase discount and $100 down payment option | Public servants who are willing to live in a revitalization neighborhood for at least three years |
| VA loans | No money down, limited closing costs | Military-affiliated homebuyers and their families |
| USDA loans | No down payment or mortgage insurance required | Low- and moderate-income buyers in rural areas |
What are low-income home loans?
Low-income mortgages are loans designed to address the issues many low-income homebuyers face: Debt, low credit and the difficulty of saving a large down payment. Typically, low-income home loan programs assist homebuyers through a combination of:
- Lower down payment requirements
- Flexible credit requirements
- Reduced closing costs
- More affordable mortgage interest rates
- Discounted mortgage insurance
In many cases, low-income home loan programs actually bar people with too high an income from participating.
How to get a home loan with low income
- Understand that having a low income doesn’t limit your ability to qualify for a loan — it’s the relationship between your income and debt that matters. Lenders will evaluate your debt-to-income (DTI) ratio when you apply for a mortgage. Most view a DTI below 35% as favorable.
- If the down payment is your main hurdle, look for low- or no-down-payment loan options. It’s a myth that you have to put down 20% — there are plenty of loans that require far smaller down payments.
- Homebuying assistance programs can help cover your down payment and closing costs. In some cases, these funds don’t have to be repaid.
Right now, mortgage rates are high, and the median home price for new and existing homes in the U.S. is around $411,400 according to a recent LendingTree analysis (this, of course, can vary greatly depending on where you live). This may seem intimidating, but here are six loan programs for low-income buyers that could be your ticket to homeownership — even in today’s expensive and competitive market.
Fannie Mae HomeReady® loans
- Down payment minimum: 3%
- Credit score minimum: No set minimum, but 620 is common
- Income limits: Maximum 80% of the area median income (AMI)
- Loan limits: Conforming loan limits
- Risk-protection fees: Mortgage insurance required with a down payment of less than 20%
Best for: Low-income buyers struggling to come up with a down payment.
The HomeReady® mortgage program from Fannie Mae offers home loans for low-income buyers with limited cash for a down payment. Its more flexible guidelines make it easier for borrowers to qualify, and buyers can also use gifts or grants to cover their down payment and closing costs.
Both first-time homebuyers and repeat buyers are eligible. However, if all borrowers on a loan are first-timers, at least one borrower will need to take a homebuyer education course.
Freddie Mac Home Possible® loans
- Down payment minimum: 3%
- Credit score minimum: 660
- Income limits: Income less than or equal to 80% of the AMI
- Loan limits: Conforming loan limits
- Risk-protection fees: Mortgage insurance required with a down payment of less than 20%
Best for: Low-income buyers with limited down payment funds and at least a 660 credit score.
Freddie Mac’s Home Possible® mortgage program is similar to HomeReady, but requires a slightly higher credit score. Otherwise, it offers similar benefits: Discounted mortgage insurance, flexible guidelines that help more people qualify, a low down payment and the ability to use a gift toward the down payment. You can even use sweat equity (the time and physical labor you put into improving your home) to cover some or all of your down payment and closing costs.
Both first-time and repeat homebuyers can qualify. At least one borrower is required to complete a homeownership education course if all borrowers on a Home Possible loan are first-time buyers.
Conventional loan lenders to consider if you’re a low-income borrower
For borrowers with low incomes, existing debt payments can make it harder to qualify for a mortgage. These lenders stand out for having a high share of borrowers with debt-to-income (DTI) ratios above 36%, making them worth considering if debt takes up a sizable portion of your income.
Nearly 65% of Rocket Mortgage customers had a DTI ratio above 36%
According to 2025 Home Mortgage Disclosure Act (HMDA) data
64% of New American Funding customers had a DTI above 36%,
According to 2025 Home Mortgage Disclosure Act (HMDA) data
Guild rounded out the top three, with 63% of customers carrying a DTI above 36%.
According to 2025 Home Mortgage Disclosure Act (HMDA) data
FHA loans
- Down payment minimum: 3.5% to 10%
- Credit score minimum: 500 with 10% down; 580 with 3.5% down
- Income limits: None
- Loan limits: FHA loan limits
- Risk-protection fees: FHA mortgage insurance
Best for: Low-income buyers with a credit score under 620.
The Federal Housing Administration (FHA) insures FHA loans funded by approved lenders. Because they have looser credit requirements, FHA loans can be a good option for homebuyers who can’t reach the 620 credit threshold required by most conventional loan lenders.
You could qualify for an FHA loan with a credit score as low as 500, but you’ll need to make a larger down payment. All borrowers must pay upfront and annual FHA mortgage insurance premiums, no matter their credit score or down payment amount. FHA borrowers who make the minimum 3.5% down payment will pay FHA mortgage insurance for the life of the loan.
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Good Neighbor Next Door program
- Down payment minimum: $100
- Credit score minimum: 500
- Income limits: None
- Special requirements: Must work in public service and buy a HUD home in a revitalization area
- Risk-protection fees: Mortgage insurance or funding fees, depending on the mortgage type you use
Best for: Public servants who are willing to live in a revitalization neighborhood — determined by factors such as median income and homeownership rate — for at least three years.
The Good Neighbor Next Door program from the U.S. Department of Housing and Urban Development (HUD) allows homebuyers in eligible public service careers the opportunity to purchase a HUD home — a foreclosed home owned by HUD — at a 50% discount. You don’t have to use an FHA loan to buy your home under the program — but if you do, the minimum required down payment is only $100.
- Working full-time as a pre-K through 12th-grade educator, emergency medical technician, firefighter or law enforcement officer
- Buying a home in a HUD-designated revitalization area
- Committing to live in the home for at least three years
- Having a minimum 500 credit score
VA loans
- Down payment minimum: 0%
- Credit score minimum: No set minimum, but 620 is common
- Special requirements: Military service certificate of eligibility
- Risk-protection fees: VA funding fee
Best for: Veteran and active-duty homebuyers and their families.
The U.S. Department of Veterans Affairs (VA) offers a mortgage program to help veterans, service members and their surviving spouses purchase or build homes. The VA isn’t a direct mortgage lender, but it guarantees a portion of the loan, allowing borrowers to receive more favorable loan terms, such as a lower interest rate.
VA loans don’t require a minimum down payment or mortgage insurance. However, they do charge a VA funding fee, which varies depending on your down payment amount. The loans also limit the amount a lender can charge in closing costs, and the seller may pay a portion of the closing costs. In addition, there are no VA loan limits for borrowers with full VA loan entitlement.
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USDA loans
| USDA Section 502 Direct loans | USDA Section 502 guaranteed loans | |
|---|---|---|
| Who lends you the money? | USDA | An approved private lender |
| How does USDA help? | Lends the funds to you directly and can reduce your payments | Guarantees part of the loan to allow the lender to give you better terms |
| Payment subsidy? | Yes, and it may require repayment later | No |
| Down payment minimum | 0% | 0% |
| Credit score minimum | No set minimum; 640 typically preferred | No set minimum; 640 typically preferred |
| Income limits | Low and very low income (50% to 80% of area median income) | Moderate income (up to 115% of area median income) |
| Special requirements | Purchase in an eligible rural area | Purchase in an eligible rural area |
| Risk-protection fees | No upfront or annual guarantee fees | 1% guarantee fee and 0.35% annual fee |
Best for: Low- to moderate-income buyers in rural areas.
The U.S. Department of Agriculture (USDA) offers direct loans for low- and very-low-income borrowers, and insures home loans for moderate-income borrowers through approved lenders. USDA loans don’t require a down payment and have unique features — like loan terms longer than 30 years, payment subsidies and agency-set interest rates — that may help you enhance your buying power while still remaining within your budget and the applicable loan limits for your area.
There are two types of USDA loans: those issued directly by the USDA and those that are only backed (guaranteed) by the USDA. These two types are similar, with the main differences being how high your income can be and whether you may receive a payment subsidy. Payment subsidies reduce your monthly payments, in some cases reducing the effective interest rate to 1%. However, you may have to pay back some of the subsidy funds to the government if you sell or move out of the home.
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Frequently asked questions
Yes, you can get home improvement loans with a low income, but they can be challenging to find. Start by researching government assistance programs in your area. For example, your state may offer grants or low-interest loans to help financially strapped homeowners complete home repairs. USDA borrowers may qualify for the Section 504 Home Repair program, which provides grants to low-income elderly homeowners to help remove health and safety hazards.
Rent-to-own programs are an appealing option for low-income buyers because you don’t have to save for a down payment and pay rent at the same time. But there are potential downsides, including fees and possibly paying above-market rent. Consult with a loan officer and have a plan to become mortgage-ready within your option period before committing to rent-to-own.
An FHA loan will typically be the easiest mortgage to qualify for. It offers the lowest credit score requirement — far lower than for a conventional loan — and requires only a 3.5% down payment. VA and USDA loans can be even easier to qualify for than an FHA loan, but they’re only available to certain buyers.
There is no minimum income required to get a mortgage. Remember, what matters most is your DTI, not your income. If you’ve saved up for a down payment and you have a decent credit score and reasonable DTI, you should be able to get a mortgage. Just don’t expect to buy any house, in any location, for any amount — you’ll be limited, like all homebuyers, by what you can afford. Our home affordability calculator can help you estimate the monthly payment and loan amounts that may work for you.
Instead of thinking about the income needed, it may help to think in terms of the down payment and monthly payments required. To buy a $400,000 home with a 30-year conventional loan at a 7.28% rate, you would likely need at least $12,000 to cover the down payment, as well as the ability to afford a $3,322 monthly mortgage payment. Use a mortgage calculator to experiment with different loan values to see what your payments could look like.
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