• 
  Government-Backed Home Loans
• States May Offer Assistance
• What Constitutes Low Income?
• Frequently Asked Questions (FAQs)
• The Bottom Line

• Personal Finance
• Mortgage

Affordable Home Loan Options You Didn’t Know You Could Qualify For

You don’t have to be wealthy to own a home

By 

Andrew Martins

Updated March 26, 2025

Fact checked by 

Vikki Velasquez

Homeownership has always been central to the idea of the American dream. Unfortunately, due to skyrocketing housing prices and high mortgage rates, it’s harder than ever for many people to achieve that dream.

If you’re living in a below-average income household, you may feel like you’re completely priced out of the housing market. But thanks to some state and federal low-income mortgage options, the dream of homeownership doesn’t need to be out of reach.

Key Takeaways

• Agencies like U.S. Housing and Urban Development (HUD) and the Federal Housing Authority (FHA) have homeownership programs available for low-income households.
• Your household income level determines whether you can qualify for these loans.
• In addition to federal government programs, state and U.S. territory programs are available that grant loans without a large down payment.
• It’s important to find out whether you qualify as low-income before applying for state or federal homeownership programs.

Government-Backed Home Loans

The federal government has historically been one of the largest provider of loans, grants, and other forms of assistance in the country. After all, it’s in the government’s best interest to keep as many of its citizens housed as possible to maintain a happy and healthy workforce. This is why agencies like the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA) have programs aimed at helping lower-income households afford homes.

Borrowers who meet certain criteria can seek and obtain government-backed mortgages with varying requirements, down payment minimums, and perks through several programs, including FHA loans and VA loans. Because the U.S. government backs these programs, lenders often see these programs as a low-risk investment, leading to better terms and potentially more affordable rates.

FHA Loans

With generally less strict requirements than other government-backed programs, the FHA loan program is designed to help first-time low-income buyers enter the housing market.

To qualify for the program, borrowers should have a median credit score of 580 and be able to afford at least a 3.5% down payment on the home.12 You can determine your FHA loan limit—which will depend on the county where you plan on making your purchase—by consulting the HUD website.

Important

Regardless of your credit score and available down payment, all borrowers are required to pay the closing costs. These costs, including lender fees, third-party fees, and any prepaid items, can’t be financed. Borrowers are also on the hook for annual mortgage insurance premiums.

Good Neighbor Next Door Program

Eligible public service employees can purchase a home at 50% off through the Good Neighbor Next Door program, which HUD provides. All that’s required is that you are currently working as a full-time:3

• Pre-K through 12th-grade educator
• Emergency medical technician
• Firefighter
• Law enforcement officer

You should also plan to buy a home in a HUD-designated revitalization area and be willing to commit to living in that home for at least three years.

There are a few caveats, however. You can only buy properties through the Good Neighbor Next Door program, and properties are only listed for seven days. If multiple people bid for the same property, the winning offer will be selected by random lottery. A silent second mortgage will also be required for the discount amount, though you won’t be making payments and no interest will accrue as long as you stay in that home for the requisite three years.3

USDA Section 502 Guaranteed Loan Program

Also known as the Rural Development loan, this option helps prospective low-income homeowners buy a home without making any down payment at all. The major requirement for this loan, however, is that it’s only available for certain properties that are located in rural parts of the country.45

According to the USDA, eligible applicants can use the loan to purchase, build, rehabilitate, improve, or relocate a dwelling in an eligible rural area with 100% financing. Furthermore, the program guarantees 90% of the loan, so lenders are extremely comfortable knowing there’s less risk to approve such a loan without a down payment.

Applicants looking to get into this program cannot exceed 115% of the median household income in the chosen region. They must also agree to personally live in the home as their primary residence and be a U.S. citizen, U.S. non-citizen national, or qualified alien.4

VA Loans

Veterans, active members, and surviving spouses with a low annual income may be eligible for a VA loan. Provided by the U.S. Department of Veterans Affairs (previously the Veterans Administration), these loans are designed to connect current or former military personnel with access to loans from private lenders at competitive rates.

If you’re obtaining mortgage assistance from the VA, know there’s no requirement for a down payment, and the seller can help cover your closing costs. Furthermore, it doesn’t require any monthly mortgage insurance.6

Eligibility is based on the kind of service and how long you or your loved one served. If you’re currently on active duty or your service was during wartime, you need at least 90 days of experience. If your service was during peacetime, you need 181 or more days. If you were separated from the service, you must have been in the service for 24 months or the full ordered period of the service. And if you were in the National Guard or Reserve, you must have served at least six years.7

Calculate Your Monthly Payment

Your monthly mortgage payment will depend on your home price, down payment, loan term, property taxes, homeowners insurance, and interest rate on the loan (which is highly dependent on your credit score). Use the inputs below to get a sense of what your monthly mortgage payment could end up being.Enter Home Price

$Enter Down Payment

$

%Select Loan Term

30 years20 years15 years10 yearsEnter APROr Use Credit Score For Estimate

%

Or

Your Credit Score760-850700-759680-699660-679640-659620-639

+ More Options

Monthly Payment

$2,649.04/monthfor 30 yearsMonthly Payment$2,649.05

Principal & Interest

$2,264.38

Property Taxes

$256.67

Homeowners Insurance

$128.00

Mortgage Size$352,000.00

Mortgage Interest*$463,176.16

Total Mortgage Paid*$815,176.16

*Assuming a fixed interest rate. A variable rate could give you a lower upfront rate. To understand more click here.Expand

States May Offer Assistance

Along with assistance from the federal government, all 50 states and U.S. territories have the capability to provide rental, homeownership, and house-buying assistance. Sponsored by your state or local governments, these programs vary from state to state.

To find out more about your state’s housing assistance programs, including any mortgage loan programs, be sure to check out your state’s HUD page. Depending on the state and its resources, assistance may come in the form of down payment assistance, grants, or forgivable loans. Eligibility and requirements may vary depending on the state where you’re looking to become a homeowner.

Warning

Some programs don’t finance loans for investment or mixed-used properties, so review the rules before applying if you are seeking property beyond a more typical condo or single-family home.

What Constitutes Low Income?

Knowing where your income stands can help you find the right home loan for you. Not only will you know how much you can afford per month in payments, but you may also be able to take advantage of special loans or programs if you need additional help.

The threshold for low-income housing and other programs for low-income households can vary widely from state to state. For example, a family of four in Jersey City, New Jersey, is considered