Can a home be purchased using disability benefits?
In the United States, there are numerous mortgage options available for military veterans living with disabilities and individuals receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). This article aims to provide an overview of the key considerations and steps involved in securing a mortgage for those in these categories.
The U.S. Department of Veterans Affairs offers two types of disability housing grants for veterans: Specially Adapted Housing (SAH) grant and Special Housing Adaptation (SHA) grant. However, for those seeking a mortgage, it's important to know that SSDI and SSI income can be used as qualifying income, provided one meets standard mortgage lender requirements such as credit score, debt-to-income ratio, and down payment capacity.
To increase the chances of approval, it's crucial to document SSDI/SSI income. Lenders typically require official documentation, such as your current SSA benefit letter and recent SSA-1099 tax form, to verify the amount and stability of your disability income.
SSDI is often treated like retirement income and considered stable, assuming you will continue receiving benefits over time. SSI, a needs-based program, may be scrutinized more closely by lenders due to its variability and limits. Nevertheless, with proper documentation and explanation, SSI can also qualify as a stable income source.
In addition to income verification, you must meet other mortgage eligibility criteria, including a sufficient credit score, an acceptable debt-to-income ratio, and adequate funds for down payment and closing costs.
Various state and federal programs exist to help people receiving disability benefits qualify for home ownership. These can include grants, low-interest loans, or more lenient underwriting rules. It's worth asking lenders if they have specialized products for borrowers on SSDI or SSI.
FHA loans, insured by the Federal Housing Administration, are another popular option for people with disabilities, with minimal income or lower credit scores. With an FHA loan, the required down payment depends on your credit score: With a score of 500 to 579, a 10 percent down payment is needed, and with a score of 580 or higher, just 3.5 percent is required.
For military veterans and their families, living with disabilities or not, a VA loan to purchase a home is another viable option. These loans typically have no credit score requirement or down payment requirement.
The Housing Choice Voucher Program (HCV), also known as Section 8, makes it easier for low-income Americans, veterans, and people living with disabilities to afford rent.
To qualify for Fannie Mae's HomeReady or Freddie Mac's Home Possible, your income must be less than 80 percent of your area's median income. These flexible loans for low-income buyers, including those on disability, require as little as 3 percent down.
It's advisable to work with a local real estate agent who can help find properties within your budget, negotiate with sellers, help close the sale, and may be able to tell you about specific assistance programs for low-income buyers or buyers living with disabilities.
Down payment assistance programs can help reduce the upfront costs of buying a home for individuals on disability. Some nonprofit groups, such as Habitat for Humanity, may also help people living with disabilities become homeowners.
If you live in a rural area, you may qualify for a home loan from the U.S. Department of Agriculture (USDA), which does not require a down payment.
If you feel you have experienced housing discrimination, you can file a complaint with the Department of Housing and Urban Development's (HUD) Office of Fair Hiring and Equal Opportunity.
There are grant programs available for people with disabilities, such as down payment assistance programs offered by states, counties, and cities.
Remember, it's important to know each mortgage program's criteria to qualify before applying for a particular type of mortgage. The Fair Housing Act prevents home sellers, landlords, and real estate professionals from discriminating based on disability.
Lastly, it's rare for a home to be adapted for a disability, and making changes can be expensive. Therefore, it's essential to consider these factors when choosing a home or applying for a mortgage.
Getting preapproved for a mortgage gives buyers a good understanding of how much a lender is willing to loan, regardless of income type. This step is highly recommended before beginning the house-hunting process.
- When applying for a mortgage as an individual receiving Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), it's crucial to provide official documentation such as your current SSA benefit letter and recent SSA-1099 tax form to verify your disability income.
- Various state and federal programs are available to help people on disability qualify for home ownership, including grants, low-interest loans, or more lenient underwriting rules. It's worth asking lenders if they have specialized products for borrowers on SSDI or SSI.
