Low-Income Home Buying Programs
by Brandon Cornett
What are low-income home buying
programs, and how do they help home
I get this question a lot, especially
from first-time home buyers. So here's
an overview of low-income home buying
programs, how they work, and where
you can learn more.
Generally speaking, a low-income
home buying program is any program
that's designed to help home buyers
who may not otherwise qualify for
a mortgage loan.
Normally, when you talk about such
programs, you're talking about a
loan that gets some form of government
backing. In other words, the government
backs or guarantees a loan on behalf
of the home buyer who is applying
for the loan. This is the essence
of how most low-income home buying
When the government backs a loan
for a slightly unqualified borrower,
mortgage lenders will be more inclined
to loan money to that borrower. The
lender is comfortable doing this,
because in the event that the borrower
defaults on the loan, the government
has agreed to back it, so the lender
would still be paid.
Fannie Mae is a shortened version of Federal National Mortgage Association
(FNMA). Congress created this organization in 1938. According to their website,
Fannie Mae "provides financial products and services that make it possible
for low-, moderate-, and middle-income families to buy homes of their own."
Learn more at www.FannieMae.com
Freddie Mac is a shortened version of Federal Home Loan Mortgage Corporation.
Congress chartered this organization in 1970. Freddie Mac supports the secondary
mortgage market by purchasing residential mortgage loans and reselling them
to investors (mostly on Wall Street). This increases the availability and
affordability of home loans for low- and middle-income Americans.
Learn more at www.FreddieMac.com
As a home buyer, you wouldn't normally
deal directly with an organization
like Freddie Mac or Fannie Mae, but
they do have a role in the low-income
home buying process.
Federal Housing Authority
The Federal Housing Authority (FHA) also supports low-income home buying in
the U.S. This organization was created as part of The National Housing Act
of 1934. The FHA insures mortgages, which helps low-income home buyers qualify
for mortgage loans they might not otherwise qualify for.
Learn more at www.FHA.gov
Rural Housing Authority
The Rural Housing Authority (RHA) can assist low-income home buyers in certain
situations. The RHA is part of the United States Department of Agriculture
(USDA). Unlike the organizations listed above, the RHA actually makes direct
loans to home buyers. They also guarantee loans for home buyers in rural
Learn more at www.rurdev.usda.gov/rhs
Veteran's Administration Home
The Veteran's Administration (VA) helps home buyers by guaranteeing loans made
by mortgage lenders. The VA does not actually make direct loans. The VA home
loan program is reserved for U.S. military veterans and their spouses. To apply
to this program, one must first obtain a Certificate of Eligibility from the
VA. The home buyer would then present this certificate to their mortgage lender.
Learn more at www.homeloans.va.gov
In addition to the federal programs listed above, there are many programs unique
to certain states. For instance, the Michigan State Housing Development Authority "makes
low interest mortgage loans available through [their] network of experienced
lenders." Most other states have similar programs, in one form or another.
State programs are too numerous
to list on this page. To learn more
about them, searching online for
home buying programs in your state.
About the Author: Brandon
Cornett publishes a website full
financing advice as well as several
other websites for consumers. Visit
the author online at http://www.mortgage-refinance-advice.com/blog/