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Home Loans For People with Disabilities: Learn About Your Options!

If you're among the millions of people living with a disability in the U.S, you've had to overcome numerous obstacles throughout your life. And while securing a mortgage can be a daunting task for anyone, having a disability introduces a unique set of challenges to buying a home.

However, having a disability does not automatically lock you out of homeownership. Although you might need to transcend various hurdles that a person without a disability ordinarily wouldn't, it is still possible to make your dream of homeownership a reality.

So, in this complete guide, you will learn everything you need to know about buying a home as a person living with a disability, including the various mortgage products and home financing assistance available to you.

We will also share with you some general tips to follow when purchasing a home on a mortgage to help make the process a lot easier and smooth for you. With that being said, let's get right into it.

Benefits and Downsides Of Homeownership For People Living With Disability

Buying a home if you have a disability can be both exciting and stressful at the same time, particularly if you need a residence that provides special accommodations for your disability.

So, if you're wondering whether you should apply for a home loan, you need to weigh your options carefully. Here are some of the pros and cons to consider when deciding whether or not to seek a mortgage:


Homeownership Affords You A High Level Of Independence

Today, the vast majority of people living with mental or physical disabilities live in assisted-living homes, group homes, or with their parents. This essentially means that their lives are, to a large extent, controlled by someone else's decisions. This can be a hindrance to their freedom and sense of autonomy.

By contrast, living in your own home gives you greater control over your life and responsibility for your wellbeing. In addition to giving you a feeling of independence, owning a home also enhances your sense of connectedness to others. Once you become a homeowner, you are recognized as an essential part of your neighborhood, which creates a feeling of belonging.

You Can Receive Personal Assistance At Home

Although you will no longer be living in an institution after purchasing a home, you may still want personal assistance. Fortunately, this may still be available to you as a homeowner.

The only difference is that instead of going to a nursing facility to enjoy the benefits of personal assistance, the professionals will come to you.

Special aid nurses in group homes or nursing facilities are typically compelled to adapt to the group's general needs. Still, by purchasing your own house, you will have the option of receiving support tailored to your specific needs and routines.

You May End Up Saving A lot Of Money In The Long Run

In most cases, purchasing a home is less expensive than renting in the long run. While you can't get back your rent once you've paid it, making monthly mortgage payments allows you to buy equity into the home you're purchasing.

With that being said, depending on your accommodation needs, you might find that the difference between renting and owning a home is marginal.


Assisted Living Costs Might Be Higher If You Live In Your Own Home

As highlighted before, it is possible to receive personal assistance from nursing professionals even if you live in your own home.

However, the cost of long-term assisted living and home maintenance can be much higher if you're a homeowner compared to if you rent a room at a nursing home.

This is because you will need to facilitate the travel of your nursing aids and pay more for the cleaning and maintenance of your home.

Finding A Suitable Home May Not Be Easy

Finding a property that meets all your criteria can be very challenging if you live with a disability. So, if you choose to purchase a home, you might need to do some thorough looking to find a property that best suits your unique circumstances.

Remember, you want to purchase a home that has the right accommodations to support your disability and is also located near all the amenities you might need, such as grocery stores, banks, and hospitals.

How Does The Government Define Disability?

The definition of a disability may vary from one organization to the next. However, according to the Federal government, a disability is a mental or physical impairment limiting an individual's ability to perform specific day-to-day tasks. Various forms of impairment impact many people daily, the most common being:

  • Thinking
  • Learning
  • Vision
  • Mental illness
  • Movement
  • Hearing
  • Memory
  • Social relationships

In general, any impairment that is judged to impose a considerable constraint on a significant life activity is deemed a disability by the federal government and makes you eligible for disability-related mortgage programs and financial help.

Smiling mixed ethnicity couple talking with sign language

Home Loans For People Living With Disability

As mentioned at the outset, there are various federal-backed home financing products that individuals living with a disability can take advantage of when purchasing a home.

If you're already receiving disability benefits or social security, you may be eligible for several mortgage programs and other forms of home financing assistance.

Here are some of the best home loans for people living with disability:

Fannie Mae Home Loans

Fannie Mae is one of two agencies that provides the most significant number of home loans in the U.S, the other being Freddie Mac. Securing a Fannie Mae-backed home loan can be highly beneficial to people who cannot afford a substantial down payment for a home purchase.

Fannie Mae's HomeReady Mortgage only demands a 3% down payment, which amounts to about $7500 for a property valued at $250,000. Moreover, prospective homebuyers who are disabled can use disability home loan grants and donations from family and friends to cover the total down payment.

Non-occupant co-buyers may also be eligible for Fannie Mae loans. This essentially means that a family member or personal friend willing to contribute their credit and financial history can assist you in securing the mortgage.

To qualify for a Fannie Mae loan, homebuyers need to meet the following general requirements:

  • A minimum FICO score of 620.

  • A down payment of 3% of the home's total value.

  • No more than 80% of your area's median income.

USDA Loans

The U.S Department of Agriculture has two zero-down payment loan programs that persons living with a disability can leverage to secure home financing. These are USDA Guaranteed and USDA Direct.

USDA Guaranteed

While the USDA backs USDA Guaranteed loans, they are not offered by the Federal government but by private lenders approved by the USDA. To qualify for these mortgage products, a borrower must meet several minimum requirements, including:

  • A minimum FICO score of 640.

  • An income not exceeding 15% of the area's median income.

  • The home must be in a USDA-approved "rural area."

USDA Direct Loans

USDA Single Family Housing Direct Loans are available to disabled homebuyers who earn less than the area's median income. The eligibility for this home financing program and the amount of payment assistance a borrower qualifies for depends on their household income.

The Direct Loan is a subsidized mortgage product, which means that the USDA will cater for a portion of the borrower's mortgage payments for a specific timeframe. Another significant advantage of this home loan is that interest rates can be as low as 1%.

Disabled homebuyers who qualify for a Housing Direct Loan can use it to purchase a new or used property and construct, restore, or renovate a home. The repayment term is between 33 and 38 years. This more extended payback period, paired with the low-interest rate, makes payments more manageable.

VA Loans

The VA loan program, guaranteed by the United States Department of Veterans Affairs, is one of the best home financing options for disabled veterans. VA loans typically have no down payment requirements and carry some of the lowest lending rates available. This makes them highly attractive for military service members and veterans.

Nevertheless, there are various other benefits that VA loans may provide to disabled veterans. These include:

  • Disability income can be used to qualify a disabled veteran for the mortgage loan.

  • Disabled veterans are exempt from paying the VA loan funding fee.

  • There is no minimum service requirement to be considered eligible for the VA loan.

  • Disabled veterans may be eligible for property tax exemptions.

FHA Loans

If you are in debt or have a much lower credit score than you would need to qualify for the loans mentioned above, you may still be eligible for an FHA loan. The Federal Housing Authority ensures these loans (FHA) and typically has lower down payments and more flexible lending guidelines than conventional loans.

You can qualify for an FHA loan with a FICO score of 580 and a down payment of just 3.5%. Moreover, you might get approved for this loan if you have a credit score as low as 500, although you'll need to make a higher down payment of 10%. It is hard to find many lenders who will accept such low credit scores. So, if your credit profile is less than perfect, an FHA loan might be the best option for you.

There are several other requirements you'll need to satisfy to qualify for this government-backed loan. These include:

  • The loan must be to purchase a primary residence. You can't use an FHA loan to buy a second property.

  • You must complete a home inspection and report.

  • You must be ready to occupy the home within 60 days of the closing.

HUD Housing Choice Voucher

While the U.S Department of Housing and Urban Development (HUD) is mainly recognized for providing low-income families with rental housing assistance, the Section 8 Housing Choice Voucher (HCV) program is a lesser-known housing program that provides home financing aid to eligible homebuyers.

Individuals who qualify for Section 8 rental assistance can utilize their voucher to purchase a home through the homeownership voucher program. In other words, instead of paying rent, the HUD housing choice voucher would assist with mortgage payments and other homeownership expenditures.

However, to be eligible, applicants must meet several requirements, including:

  • They must be first-time homebuyers or members of a cooperative.

  • The applying family must have at least one member living with a disability.

  • The annual income of all adult members of the household must not be less than the monthly Federal Supplemental Security Income benefit of an individual multiplied by 12.

  • The applying family must attend and complete a pre-assistance homeownership course as well as a housing counseling program.

Can I Purchase A Home On Disability Income?

It can be challenging to stay under your lender's debt-to-income ratio limitations if you have little or no income from regular employment due to disability. The good news is that most home loan programs will consider various types of disability income when qualifying you for a home loan.

Individuals under the age of 65 who are disabled can receive Social Security Disability Income (SSDI). If you receive this income for your disability, you can use it to buy a property, provided your credit score allows you to qualify for a mortgage.

The only challenge you might encounter is a sense of uncertainty about how long you will continue to receive the SSDI. For this reason, you should have your SSDI regularly reviewed to ensure the income benefit is guaranteed.

Supplemental Security Benefits are another form of disability aid available to individuals over the age of 65 and those who are blind or disabled and have a low income. While lenders may consider these funds when qualifying your mortgage application, there are some practical obstacles you might need to overcome.

For one thing, SSI recipients typically do not have a great deal of money, which makes them high-risk borrowers in the eyes of most lenders. Furthermore, SSI restricts the amount of money that can be received.

While you're allowed to include a long-term disability statement from your in your mortgage application, it's worth noting that each lender sets its regulations, and some may refuse you a loan depending on your income. So make sure you do extensive research on your prospective lender's regulations, and if you get turned down, try elsewhere.

General Tips On Buying A Home On Disability

Now that you're aware of some of the home financing products available to you, here are some of the things you can do to make the process of purchasing a home on disability a lot easier:

Understand Your Credit Profile and Work On Improving Your Credit Score

Since credit score determines the mortgage options available to you, it's a good idea to verify your score ahead of time so you can make any necessary adjustments.

Although the typical minimum credit score for a conventional loan is 620 and 580 for FHA loans, there are additional options for low-credit house purchasers.

If you have a low credit score, you can raise it by paying off debt, paying bills on time, and contesting inaccurate negative marks on your credit report.

Determine How Much House You Can Afford

Because different types of homes have different layouts, it's crucial to know what you need before starting your property search. Use a mortgage calculator to figure out how much mortgage you can pay and how it will fit into your budget.

Remember, if the property you choose doesn't meet your accessibility requirements, you may have to set aside money for renovations.

Get Pre-Qualified

Pre-qualification for a mortgage loan can assist you in determining how much you can realistically afford to put down on a home.

Your lender will assess your financial condition and estimate how much you can borrow to begin your search for a suitable home, depending on your loan pre-qualification.

Order A Home Inspection

Although a home inspection is not required if the seller has already had one performed by an impartial home evaluation agency, it is nonetheless recommended to determine the unit's condition.

This helps you estimate the property's value and allows you to determine what improvements are necessary to satisfy your accessibility and accommodation needs.

In Closing

Despite the numerous challenges that people living with disability encounter in the mortgage application process, becoming a homeowner is a feasible prospect.

So, make sure to research your options widely to find the mortgage that best suits your needs and circumstances. If you have any more questions concerning mortgages, you can also consult a home loan specialist to guide you through the process.

With over 50 years of mortgage industry experience, we are here to help you achieve the American dream of owning a home. We strive to provide the best education before, during, and after you buy a home. Our advice is based on experience with Phil Ganz and Team closing over One billion dollars and helping countless families.

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