A Guide to Acquiring Home Loans for Disabled Buyers

The median income for households with one or more disabled members is $42,736. This is 60% less than the average household income in America. At least 18 million disabled individuals qualify for federal housing assistance, but cannot access it due to a lack of awareness.

Several home loans and specialized programs exist to help disabled people live comfortably. Knowledge of how to apply for these can only further ease your search for and purchase of a house. 

Houzeo offers one of the largest listings for properties across the US – all in one place. A one-stop shop for all your home-buying needs, we also offer a list of reputable mortgage lenders near you. So don’t wait, start looking for your dream home right here!

Can You Buy a House With SSDI or SSI?

Yes, you can use Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) to get a home loan for yourself or a dependent.

SSA defines disability as a severe medical condition that prevents a person from doing substantial gainful activity’ and adjusting to any type of new work. The medical condition should be expected to last at least 12 months or result in death.

You are eligible for both SSI and SSDI if you have a disability. However, for SSDI, you must have prior work experience and have paid social security taxes during the years you worked. 

The debt-to-income (DTI) ratio is the most important factor for lenders to determine whether you will be able to afford the mortgage based on your current income. Therefore, you need to show a steady source of income to get a home loan.

SSDI and SSI qualify as steady sources of income for various home loan programs and grants. These act as proof of eligibility for Fair Housing Act (FHA) loans, US Department of Agriculture (USDA) loans, and Veterans Affairs (VA) loans.

Here is a list of documents you need to submit to be eligible for a home loan application:

• Award Letter from the SSA or Proof of Current Receipt: This acts as a ‘proof of income letter’ or ‘benefit letter’ to verify your SSI or SSDI.
• Proof of Income for the Next Three Years: It is to verify that you will continue to receive SSI or SSDI for at least the next three years and will be able to pay mortgage payments.

Are There Home Loans for People With Disabilities?

Fortunately, there are several government-backed agencies providing home loans for people with disabilities:

1. Fannie Mae Loans for Disabled Individuals: 

Fannie Mae offers special home loans for disabled home buyers with low to moderate incomes. It offers competitive interest rates, lower down payments, and flexible credit rules. 

The program is flexible in terms of income sources like pensions, social security, and child support. It even allows applicants to apply with multiple co-borrowers. 

Features of the Program:

• Low Mortgage Rates: Fannie Mae loans’ mortgage rates are lower than conventional mortgage rates. If you have a high credit score, you can qualify for 0.75% lower interest rates than standard rates. 
• Low Down Payments: It offers down payment rates as low as 3%, which is almost 50% less than conventional loans. This is beneficial if you don’t have money saved to pay the down payment or need it for other expenses.
• Allows Co-Ownership: You can apply with co-borrowers who are not residing with you. This means you can add a family member with good credit and stable income to your application and help you qualify for the loan.

Eligibility Requirements:

• The credit score should be 620 or higher. 
• You cannot earn more than 80% of your area’s median income.
• You should plan to occupy the home as your primary residence.
• Completion of a 4-6 hours online home-ownership course from a HUD-approved housing counseling agency.
• The debt-to-income ratio should not be higher than 50%.

2. VA Home Loans for Disabled Veterans:

The U.S. Department of Veterans Affairs (VA) offers home loans for disabled U.S. Army veterans and service members. It is a zero down payment home loan and offers many benefits to veterans with medical issues or disabilities associated with their service. 

It even has lenient credit rules. You can include VA disability income as a reliable income source. 

Features of VA Home Loans:

• No Down Payment or Mortgage Insurance: Compared to conventional loans, VA loans do not require a down payment or Private Mortgage Insurance (PMI).
• No Income Limit: There is no maximum or minimum income limit to qualify for a VA loan, but you need to show proof of steady income and employment to qualify.
• Low Mortgage Rates: VA loans have fixed or adjustable mortgage rates, which are lower than other loan types. Your credit score and debt-to-income ratio will determine the mortgage rates for your VA loan.

Eligibility Requirements:

• You should be a veteran, service member, National Guard or Reservist of US Armed Forces, or their surviving spouse.
• The credit score should be above 580.

3. USDA Home Loans for the Disabled:

The US Department of Agriculture (USDA) offers zero down payment home loans for disabled persons or people on disability income. You can obtain safe housing in rural areas through USDA loans. It offers the following two programs:

1. USDA Direct Loan Program:

It is also known as the Section 502 Direct Loan Program. In this program, the USDA offers to pay a part of your monthly mortgage dues. 

The payment assistance is calculated on the basis of your household income. It has interest rates as low as 1% and long repayment periods of up to 38 years.

Eligibility Requirements:

• Meet the income limit criteria for USDA loans based on the area you live in.
• You should not currently have safe and sanitary housing.
• You are not eligible for a home loan from any other sources.
• The home for which you are taking the loan should be your primary residence.
• You should not be debarred from federal home loan programs.

2. USDA Guaranteed Loan Program:

Private lenders (banks, credit unions) authorized by the USDA also offer home loans for the disabled. The USDA backs a portion of the loan, which allows for lower interest rates and credit score requirements. 

Eligibility Requirements:

• Your income should not be more than 115% of your area’s median income.
• A credit score of 640 or higher.

4. FHA Home Loans:

People with disabilities can also refinance a mortgage with a bad credit history. FHA home loans consider SSDI and SSI as reliable income sources. These loans have low mortgage rates, lenient credit score requirements, and low down payments. 

Features of FHA Loans:

• Use of Down Payment Assistance: FHA loans allow you to cover the entire down payment cost using down payment assistance funds or gifted money.
• Low Down Payment: In case you don’t want to pay off the down payment entirely upfront, it is one of the few mortgages that require a down payment lower than 5%. 
• High DTI: You can get a loan even with a debt-to-income ratio as high as 50%.

Eligibility Requirements:

• The minimum credit score should be 500.
• The property for which you are taking the loan should be your primary residence.
• You should not have federal debt related to tax or past mortgages.

5. Housing Grants for Disabled People: 

Housing grants or down payment assistance grants (DPAs) are another form of financial assistance. It is offered by the Housing Finance Agency (HFA), Veterans Affairs (VA), and some non-profit organizations.

Disabled individuals can use these grants to make the down payment for a conventional home loan. One need not repay a housing grant and can use it to cover closing costs while purchasing a home. 

Features of Housing Grants:

• Accessibility Modifications: Funds can be used for modifications such as installing ramps, widening doorways, and adding grab bars.
• Home Purchase Assistance: Some grants help with purchasing a home that meets accessibility needs.
• Renovation and Repair: Grants can be used for necessary renovations and repairs to maintain safe and livable conditions.

Eligibility Requirements:

• You should be a first-time homeowner.
• You should have a good credit history.
• Fall in the ‘low income’ category of your area/ county.

How to Apply for a Disability Loan?

Here is the step-by-step process to apply for a home loan on disability:

1. Evaluate Your Finances: Calculate your total income (including SSDI, SSI, or child support), and disability-related expenses to understand the loan amount you can afford. Further, get an estimate on your monthly payments based on different loan amounts, terms, and interest rates. Use a mortgage calculator.

2. Calculate Your Credit Score: Ensure that you meet the credit score requirements of the home loan you are looking to apply for. The minimum credit score requirements for different types of home loans are:

• VA Home Loans: 580
• Fannie Mae Loans: 620
• USDA Home Loans: 640
• FHA Loans: 580

3. Determine a Budget for Your Home: The median home price in the US is $363,628.  A key step before buying a house is to check how big a home loan you can afford.

Consider all costs for buying a house, like down payments, closing costs, mortgage payments, and insurance. 

• Down payments can range from 3%-10%, depending on your credit score
• Closing costs can range from 3%-5% depending on the loan amount
• Mortgage insurance is usually 0.5% to 1% of the total loan amount and is required when buying a home with less than 20% down payment

4. Get a Home Loan Pre-Qualification: Contact different private lenders to discuss home loans and home-assistance programs suited to your needs. Check your income eligibility, credit score, and debt-to-income ratio for different types of loans.

Bottom Line

If you have a disability, you can finance a home suited to your needs through various payment assistance programs and home loans for the disabled. However, you need to meet specific requirements for such loans, like a stable income and a good credit score, among other criteria.

Houzeo is one of the biggest property listing sites in the US, which allows you to browse thousands of home listings instantly. You can easily find homes suited for mobility needs, like ramps for wheelchair access, railings, modified bathrooms, and specially constructed doorways for easy access. 

Our technology gives you full control over the buying process, and our dedicated customer support is available to help you every step of the way. Your dream home is waiting for you, so why delay? Begin your search right here!

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