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Buying a home can present unique obstacles for people with disabilities. It’s essential to find a home that meets the physical or mental needs of the individual, but people with disabilities may also struggle to meet financial qualification requirements. While the average poverty rate for all Americans was 11.5%, it landed at 24% for disabled Americans, according to the Center for American Progress’s data on poverty in the United States.
People with disabilities don’t have to face the homebuying process alone. Several loan programs and grants are designed to help people with disabilities achieve their dreams of homeownership.
Here’s everything you need to know about buying a house for people with disabilities.
Can You Buy a House on Disability Income?
Yes, you can buy a house on disability income. Lenders will consider disability income as long as it qualifies as stable and likely to continue.
The qualifying types of disability income include Supplemental Security Income (SSI), Social Security Disability Insurance (SSDI) and any long-term disability income from an employer or insurer.
If you’re temporarily on disability benefits, you can still use it as qualifying income as long as you prove that you have another source of reliable income that will continue in its place when you’re no longer on disability.
There are a few general requirements to use disability income for your home loan:
- Just like any other source of income, you need to have enough to support your monthly mortgage payments. While it varies depending on the loan type, most lenders want to see a debt-to-income (DTI) ratio below 43% to qualify.
- You’ll need to prove that the income will continue for at least three years. If you’re expecting to switch from disability income to another source of income, the lender will consider the lesser of two incomes on your application.
- The lender will need to see proof of income. For SSI or SSDI income, you must provide the Social Security award Letter or a benefit verification letter. When the applicant differs from the person receiving the benefits, they must provide both.
- If your income comes from an employer or insurance, you’ll provide a disability policy or a statement from the employer/insurer describing the terms of the disability income.
Once you’ve collected the documents needed to qualify, you’re ready to start exploring the different loan programs available.
Home Loan Programs for People with Disabilities
Several loan programs offer benefits or assistance that can appeal to people with disabilities, especially if you struggle to meet the qualifications for traditional financing methods.
Fannie Mae HomeReady
The Fannie Mae HomeReady program is an excellent option for people with disabilities who don’t have much money saved for a large down payment. HomeReady allows for down payments as low as 3% and only requires a credit score of 620 or higher.
HomeReady considers non-traditional sources of income, which can benefit those who may receive disability benefits or have alternative forms of income. Finally, some applicants may qualify for a $2,500 credit towards their down payment and closing costs.
Freddie Mac Home Possible
The Freddie Mac Home Possible program is similar to its Fannie Mae counterpart, but there are a few key differences. While HomeReady is excellent for those with little savings, Home Possible has more options for applicants with little to no credit history.
If you have a 660 credit score or above, Home Possible only requires a 3% down payment. However, you can still qualify by making a 5% down payment if you have little or no credit. Additionally, borrowers can pay closing costs through various sources, including grants.
VA Home Loans for Disabled Veterans
VA mortgages can be exceptionally beneficial for Veterans who have incurred disabilities during or as a result of their service. VA mortgages require no down payments, have competitive interest rates and offer lenient credit requirements.
No matter the disability rating of the Veteran, they are exempt from the VA loan funding fee and can include disability income towards their qualifying income. VA loans may also have funding for accessibility modifications, ensuring that the home can be adapted to the unique needs of the disabled Veteran.
FHA Home Loans
FHA loans typically only require down payments of around 3.5% and have more lenient credit requirements. FHA loans also permit the use of gifts or grants for down payments and allow for the inclusion of accessibility modifications in the loan amount.
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Home Loan Grants and Other Resources for People with Disabilities
Beyond the benefits that may be offered from a specific loan type, government agencies, nonprofit organizations and local initiatives provide a range of grants and programs to assist people with disabilities who are looking to purchase a home.
Habitat for Humanity
Habitat for Humanity is a nonprofit organization that builds and renovates homes in partnership with low-income families and people with disabilities. Habitat homes are designed to be accessible and tailored to the specific needs of the homeowners, with features such as ramps, wider doorways, and other modifications to enhance accessibility.
Additionally, Habitat for Humanity provides affordable mortgage options, often with zero-interest loans, making it financially feasible for individuals with disabilities to become homeowners.
Rebuilding Together Americorps
This partnership brings professionals together to provide critical home repairs and accessibility modifications for homeowners with disabilities. The program’s commitment to affordable housing solutions helps alleviate the financial burdens that often accompany homeownership.
Homes for Our Troops
Homes for Our Troops focuses on building specially adapted custom homes for severely injured post-9/11 Veterans, providing them with mortgage-free housing tailored to their unique needs. These homes are designed to be fully accessible and equipped with advanced technology to enhance independence and mobility for Veterans with disabilities.
Housing and Urban Development (HUD) Housing Choice Vouchers
While traditionally known for providing rental assistance, the Housing Choice Vouchers program gives eligible participants funds to buy a home and monthly assistance in meeting homeownership expenses. Additionally, through its Family Self-Sufficiency (FSS) program, participants can access financial education and counseling, employment training and other services designed to improve their financial stability and independence.
National Disability Institute
The National Disability Institute offers valuable information on budgeting, credit management and homebuyer education. They also collaborate with financial institutions and policymakers to create more inclusive and accessible financial products and services, working to ensure that people with disabilities have equal access to housing.
Fair Housing Laws for People with Disabilities
Fair housing laws in the United States provide crucial protections for people with disabilities to ensure they have equal access to housing opportunities. The fundamental laws that protect individuals with disabilities include:
Fair Housing Act (FHA)
The Fair Housing Act is a federal law that prohibits discrimination based on disability, among other characteristics, in the sale, rental, and financing of housing. This law mandates that landlords and housing providers make reasonable accommodations and modifications for individuals with disabilities, such as allowing service animals or making accessibility modifications to rental units.
Section 504 of the Rehabilitation Act of 1973
Section 504 prohibits discrimination based on disability in programs and activities receiving federal financial assistance. This includes housing programs and entities that receive federal funding, such as the FHA and VA loan programs.
Americans with Disabilities Act (ADA)
While primarily focused on public accommodations, the ADA also has implications for housing. It requires certain types of housing, such as multifamily units built after 1991, to meet accessibility standards, including accessible common areas and units. Additionally, it prohibits housing discrimination by public entities.
Individual State and Local Laws
Many states and local municipalities have their own fair housing laws that may provide additional protections or cover aspects not addressed by federal laws. Some states, for example, have stricter accessibility requirements for housing.
HUD has implemented regulations to enforce fair housing laws, including specific guidelines for reasonable accommodations and modifications and accessibility standards for new construction and renovations.
Collectively, these laws aim to eliminate housing discrimination against individuals with disabilities, promote accessible housing, and ensure equal housing opportunities for all. Individuals who believe their fair housing rights have been violated can file complaints with relevant federal or state agencies, such as HUD or their state’s fair housing enforcement agency.