What are the best mortgage programs for disabled persons?

By Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Edited by Michael Jensen, Mortgage and Finance Guru

Updated October 20, 2020

First off, it is important to explain how you can use disability income to qualify for a mortgage.  In short, as long as you can document that your disability income is permanent you can use it when you apply for a mortgage.  Lenders typically require you to provide documents, payment receipts or bank statements to verify your income. 

Your disability income is added to any other income you receive to determine the mortgage you can afford.  The lender also considers your monthly debt expenses, credit score and other qualification factors when they evaluate your mortgage application.  The mortgage you qualify for plus your down payment equals the home you can afford to buy. 

Use our HOW MUCH HOME CAN I AFFORD CALCULATOR to determine what price home you can buy based on your monthly gross income and debt

After you have a better understanding of the mortgage and home you can afford, your next step is to select a mortgage program.  Below we review some of the best mortgage programs for people with disabilities.  Although many of these mortgage programs are available to all eligible borrowers, they offer benefits that may be especially applicable to disabled persons.

These programs are typically provided by approved lenders, frequently in collaboration with HUD-approved state or local housing commissions.  Click on a program title to review more information including eligibility guidelines and qualification requirements.

HomeReady Mortgage Program.  The Fannie Mae HomeReady Mortgage program enables you to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower financial contribution.  The HomeReady Program also permits lenders to consider non-traditional sources of income from non-occupant borrowers such as a relative, non-borrower household members and boarders which may make it easier for you to qualify for a mortgage.  You can combine a HomeReady mortgage with a down payment grant or community seconds loan to purchase a home with no personal financial contribution.

Home Possible Mortgage Program.  The Freddie Mac Home Possible program enables home buyers to buy a home with a down payment as low as 3.0% of the property purchase price and no minimum borrower financial contribution.   The Home Possible Advantage program potentially offers a reduced interest rate for borrowers with low incomes or for properties located in certain areas.  Borrowers can combine a Home Possible loan with a down payment assistance or affordable seconds program to buy a home with minimal financial contribution.

The HomeReady and HomePossible programs are offered by traditional lenders such as banks, mortgage brokers and credit unions. We recommend that you contact multiple lenders in the table below to learn more about program availability and to compare mortgage terms.

VA Mortgage Program. The VA Mortgage Program enables eligible military personnel and veterans to buy a home with no down payment.  Although technically the VA Program has no minimum credit score requirement most lenders require a score of 620.  The VA also offers mortgage programs for veterans with disabilities with unique borrower-friendly terms.

USDA Home Loan Program.  The USDA Program enables you to buy a home in a designated rural area with no down payment which makes owning a home more attainable.  Although the property needs to be located in a specific area, the USDA home loans are available in a significant portion of the country. 

FHA Mortgage Program. The FHA Mortgage Program enables you to buy a home with a down payment as low as 3.5% and a credit score as low as 580 if your down payment is between 3.5% and 10% of the property purchase price.  The minimum credit score required is only 500 if you make a down payment of at least 10%.  Borrowers can combine an FHA mortgage with a personal gift, down payment grant, closing cost assistance program or qualified second mortgage to purchase a property with no personal financial contribution.

The FHA mortgage program requires you to pay an upfront and monthly mortgage insurance premium (MIP) in addition to your closing costs and mortgage payment.  The good news is that FHA mortgage rates are usually lower than the rates for other loan program which saves you money.  The table below shows FHA rates and closing costs including the upfront FHA mortgage insurance fee.  We recommend that you shop multiple lenders to find the best FHA mortgage terms.

HUD Section 8 Voucher Program. The HUD Section 8 Voucher Program is the federal government's program that enables low-income families, the elderly and the disabled to afford a home in the private market. The Section 8 Voucher Program is typically used to provide rental assistance but the program may also be used in some cities to help participants purchase a home, under certain circumstances.  The HUD Section 8 Voucher Program is offered through HUD-approved state or local housing commissions.

Your local housing commission may offer additional home buyer resources that may be applicable to you such as a down payment assistance program or closing cost assistance grant.  These programs help you pay for all or part of your down payment and closing costs when you buy a home.  I have provided a link to the HUD web site below where you can select your state to learn more a out the programs available to you.

HUD State Resources Website

In addition to contacting your HUD-approved housing commission and reviewing the mortgage programs outlined above, there are some additional organizations that offer programs that may be help  persons with disabilities qualify for a mortgage and buy a home. I have provided a brief summary of the American Association for People with Disabilities (AAPD), Habitat for Humanity and NACA below.

American Association for People with Disabilities (AAPD). AAPD works to improve the lives of people with disabilities by acting as a convener, connector, and catalyst for change, increasing the political and economic power of people with disabilities.

Habitat for Humanity. Habitat’s vision is of a world where everyone has a decent place to live. Habitat works toward its vision by building strength, stability and self-reliance in partnership with people and families in need of a decent and affordable home.

NACA Mortgage Program. NACA is a not-for-profit organization that offers mortgage programs designed to make home ownership more attainable. The NACA Mortgage Program enables borrowers to purchase a home with no down payment and no closing costs. You can learn more about the program by visiting the NACA web site.

Sources

"Buying a Home."  Federal Housing Administration.  U.S. Department of Housing and Urban Development, 2020.  Web.