In case you missed it, buying a home is becoming more expensive.
Buyers face mortgage rates over 6%, which have been climbing since the onset of the conflict in the Middle East, and median home prices are near the record high. For low-income households, which are defined as earning no more than 80% of the area median income, homeownership can be especially difficult to achieve.
Luckily, there are lender- and government-backed community mortgages that can help homebuyers who don't make a lot of money.
How do I know if I am low-income?
The U.S. Department of Housing and Urban Development (HUD) defines a low-income household as earning no more than 80% of the area median income (or AMI) — the middle range for incomes in a specific census area based on household size.
You can find the AMI in your area by typing your ZIP code into Fannie Mae's AMI lookup tool.
Many income-restrictive mortgage programs use this 80% guideline. Some are available to borrowers who make up to 100% to 120% of the AMI.
Mortgages for low-income borrowers
Several large lenders have proprietary mortgage programs aimed at homebuyers who make less than the 80% or 100% AMI thresholds.
Rocket Mortgage RocketONE+
- Offers a 1% down mortgage, making it a great option for first-time homebuyers who don't have enough saved up for a down payment.
- Above average scores for customer satisfaction from J.D. Power, meaning you'll be in great hands from application to closing day.
- With an average closing time of 22 days — nearly half the industry average — homeowners will be able to get the keys to their home as soon as possible.
- Rocket will give you a rebate of up to $10,000 for buying with Rocket Homes, which pairs homeowners with a real estate agent.
- No USDA mortgages, construction loans or HELOCs
- Hard credit check required for customized rate
- No physical branches
Details: RocketONE+ gives borrowers who put down as little as 1% a 2% grant for homes priced at $350,000 or less, starting them with 3% equity.
Income requirements: 80% or less of AMI.
Other requirements: Rocket Mortgage requires borrowers to have at least a 620 credit score and a debt-to-income ratio of no more than 50%. The loan must also be used to purchase a primary residence.
- The average closing timeline for borrowers is 22 days.
- Rebate available if you find your home through the Rocket Homes real estate platform.
- Rocket Visa Signature Card users earn points toward a down payment or closing costs on a future Rocket Mortgage home loan.
- The Rocket RentRewards program lets you deduct 10% of your last 12 rental payments from closing costs.
- Rocket Mortgage's loyalty program lets you earn points and reduce closing costs by reading articles, watching videos and using its loan calculators.
Guild Mortgage 1% Down Advantage
- Offers a wide range of uncommon loans, so you're more likely to find one that fits your needs than with other lenders.
- Boasts several down payment assistance programs, making it a great lender for first-time homebuyers who may not have much saved up for a down payment.
- Some loans closes can receive a 17 day closing guarantee, which can ensure you get the keys to your home in quicker than half the average timeline.
- E-closings available so you may be able to finalize your mortgage paperwork from your couch.
- Rates are not available online
- Does not issue mortgages in New York
Details: Guild Mortgage gives eligible borrowers who put at least 1% down a 2% down payment grant. It will also fund a 1% interest rate buydown for the first year of the mortgage.
Income requirements: 80% or less of AMI.
Other requirements: At least a 620 credit score and a down payment of no more than 5% (including any grant). Homebuyer education is required and the loan can only be a purchase mortgage for a primary residence.
- Down payment assistance aimed at low-to-middle-income homebuyers
- Non-qualifying mortgages that offer flexibility with income criteria and credit history.
Chase Bank's DreaMaker Loan
- Existing Chase customers can get a rate reduction
- Above-average customer satisfaction scores, meaning you're likely to get stellar service and customer service pros who are ready to answer your questions and guide you through the process
- Closing timeline guarantee so you won't have to worry about whether or not you'll close on time.
- Homebuyer grants of up to $7,500, a huge cash infusion that homebuyers can put towards closing costs and down payments.
- The Chase DreaMaker℠ loan only requires 3% down payment for qualifying homebuyers, lower than the typical 5% minimum required for a conventional mortgage, making it a great option for those who haven't saved much for a down payment.
- No USDA loans or HELOCs
- No closing guarantee for refinancing
- Chase homebuyer grant only available in select areas.
Details: With a Chase DreaMaker loan, eligible homebuyers can put as little as 3% down on a conventional mortgage and Chase will lower the requirements for private mortgage insurance.
Income requirements: Borrowers in most regions must make no more than 80% of the AMI. However, there is no income limit for borrowers in 15 metro areas, including New York, Chicago and Atlanta.
Other requirements: A credit score of 620 and a debt-to-income ratio of 45% or less.
- Over 4,500 retail locations throughout the country
- Discounts for existing Chase Bank customers
- Homebuying grant of up to $10,000 for qualified borrowers, depending on location
New American Funding's Pathway to Homeownership
- Flexible credit requirements
- Helps buyers make all-cash offers
- Programs to increase minority homeownership
- Nationwide availability
- High fees
- Customized rates not available online
Details: New American Funding's Pathway to Homeownership loan allows eligible first-time buyers in cities like Miami, New York, Dallas, Cleveland and St. Louis to put as little as 3% down and receive up to $7,500 for down payment, closing costs or other upfront expenses. There is also an option for the seller to buy down your rate.
Income requirements: Depending on the program, borrowers must meet income limits of no more than 80% or 100% of AMI.
Other requirements: Borrowers living in an eligible metro area can purchase a home anywhere, not just locally.
- Flexible credit score requirements
- NAF Cash helps borrowers make a cash offer, which can be helpful in a competitive market
- Offers down payment assistance to buyers in some cities outside the Pathway to Homeownership program.
United Wholesale Mortgage Conventional 1% down
United Wholesale Mortgage
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional, fixed-rate, adjustable-rate, FHA loans, USDA loans, VA loans, jumbo loans non-qualifying mortgages, construction loans, refinancing, construction, bank statement, 1% down mortgages
Terms
30-year fixed rate and more.
Credit needed
620 for conventional, 500 for FHA loans, 660 for jumbo
Minimum down payment
3% for conventional loans, 3.25% for FHA loans, 0% for VA and 0% Down Purchase mortgage
Pros
- Low down payment options
- Non-qualifying mortgages that accept alternative forms of credit
- Virtual closings are available
Cons
- Must go through a third-party mortgage broker
- Rates are higher than average
- No home equity loans
Details: United Wholesale Mortgage allows borrowers to put down just 1% and receive an additional 2% grant, up to $4,000.
Income requirements: 50% or less of AMI.
Other requirements: UWM does not lend directly to borrowers, so you'd have to go through a mortgage broker to secure a loan.
- Virtual and hybrid closings available in some states
Other mortgage options
There are also government-backed loans available through banks and other commercial lenders, including Rocket Mortgage and Guild Mortgage.
- Freddie Mac's Home Possible: Available to homebuyers who earn 80% or less of the AMI and can put at least 3% down on a home that is their primary residence. A credit score of 660 is typically required.
- Fannie Mae's HomeReady: Available to homebuyers who earn 80% or less of the AMI and can put at least 3% down on a primary residence. A credit score of 620 is typically required.
Down payment assistance
Down payment assistance (or DPA) programs are grants or loans that go toward a down payment, closing costs or other upfront expenses. They can be offered by lenders, government agencies and other private or non-profit entities.
Many down payment assistance plans are geared toward first-time or low-income homebuyers. Freddie Mac's DPA One lists hundreds of programs throughout the country.
Homebuying FAQs
What is considered a low income?
The Department of Housing and Urban Development considers households earning 80% or less of the area median income to be low income.
How can I get a mortgage if I have a low income?
So long as you prove you can afford the monthly mortgage payments, you may be able to get approved. A good rule of thumb is that no more than 28% of your income should go to housing expenses. Many lenders offer mortgages specifically for low- and moderate-income borrowers.
What is the best mortgage lender for low-income borrowers?
While there is no one lender suitable for every borrower, Guild, Rocket Mortgage, New American Funding, Chase Bank and United Wholesale Mortgage all have proprietary loans aimed at low-income homebuyers. Other lenders offer government-backed HomeReady and Home Possible loans that are also geared toward low-income borrowers.
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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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Our methodology
CNBC Select analyzed dozens of U.S. lenders to determine the best mortgages for low- and middle-income buyers, focusing on the following features:
- Income requirements: We only considered lenders with community loans available to borrowers making 80% of the area median income.
- Down payments: We considered the minimum down payment for income-specific loans, as well as the number and type of DPA programs offered.
- Approval requirements: Lenders were reviewed based on the maximum debt-to-income ratio and credit score needed.
- Fees: We weighed lenders more heavily if they had discounts or grants that could be used toward closing costs and other upfront expenses.
- Streamlined application process: We considered whether lenders offered an online application and/or an in-person experience.
We also considered CNBC Select audience data when available, such as general demographics and engagement with our content and tools.
