Lower-Income Family Housing is Possible

Mortgage News from Quicken Loans

Just because you earn a low to moderate income doesn't mean you can't live in a home of your own. You don't have to be relegated to renting an apartment where you're not earning any equity; and you don't necessarily have to live in a cheap manufactured or mobile home.

Many lenders offer what is a conforming Fannie Mae loan where the income requirements are more relaxed.

The Qualifications

If you have decent credit, but earn less than the median income for your area, it's still possible to get a mortgage to finance a home. However, there are a few places where the income restriction is loosened. That means you're allowed to earn a certain percentage above the area's median income mostly because of the higher cost of living. Those places include:

  • Newark and Bergen/Passaic, NJ
  • Portland, OR
  • Seattle, WA
  • Boston, MA
  • New York, NY and Suffolk, Nassau, Westchester and Rockland Counties
  • The states of California and Hawaii

If you live in a Fannie Neighbors area, this income restriction doesn't even apply.

The Benefits

The biggest benefit to this kind of mortgage is that it's much cheaper than other mortgages in many ways. First, you don't have to have a large down payment. Some lenders even allow 100 percent financing, meaning you can get a mortgage for the entire purchase price of the home you want to buy. Second, you don't have to pay as much private mortgage insurance (PMI) as other high loan-to-value (LTV) mortgages. Third, the closing costs are usually cheaper. In fact, some lenders allow up to six percent seller concessions, which means the party selling the home offers to pay for your closing costs to help sell the house faster. And fourth, the interest rate is a little better than some 100 percent LTV loans.

Because this loan was specifically designed for people with a low to moderate income, it is ideal for people such as college graduates who may only be earning an entry-level paycheck; young families who are just starting out; folks who were affected by Hurricane Katrina; and people in a lower-income bracket and have little money for a down payment and closing costs.

The American dream of owning a home isn't just for the rich or even the more fortunate. Look for a reputable lender that offers loans to lower-income families and that can help you through the entire home buying process. You work hard and just because you don't earn a lot doesn't mean you shouldn't be able to put a roof over your head.

This article is reprinted by permission from Quicken Loans © 2006 Quicken Loans Inc. All rights reserved.