How to Buy a Home Using the Section 8 Housing Choice Voucher Program

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Section 8 is a federal housing Program that provides rental assistance for participating low-income families. However, it is also possible to use Section 8 to buy a home under some circumstances.

The Section 8 Housing Choice Voucher (HCV) Program allows families to use a portion of their rent to buy a home if they meet program requirements. Families can get help with down payments, closing costs, and lower interest rates.

The government rationale behind this program is that homeownership has more value than renting. Homeowners have a personal stake in where they live and will put more effort into maintaining a home’s value versus places where they simply rent without any close ties to the property.

Owning a home also allows program participants to build equity in an asset that can eventually lead to a higher standard of living.

A Brief Explanation of the Section 8 Program

The Section 8 Program operates under regulations by the U.S. Department of Housing and Urban Development and provides Housing Choice Vouchers to eligible households. 

There are several requirements applicants must meet to participate in the Section 8 Program, whether as a renter or a potential homebuyer. The first step is understanding the Section 8 Program in broad terms.

Section 8 Program does not provide a “free house” to the unemployed. Unless participants are seniors or disabled on fixed incomes, displaced families, or homeless individuals with disabilities, at least one household member must work full-time.

The program also assists senior citizens and disabled persons on fixed incomes.

A family must pay part of monthly housing expenses equal to 30% of their adjusted income.

A family can earn no more than 50% of the median income of their area, adjusted for family size. For example, if the median income in an area is $50,000, participants can earn no more than $25,000 a year to be eligible.

Program guidelines also require that at least 75% of the vouchers be allocated to families earning no more than 30% of the local median income. Using the same $50,000 means 75% of participants in an area can earn no more than $15,000. That makes it more difficult for those who fall in the 30-50% range.

Section 8 voucher programs for homebuyers and rentals are administered through local public housing agencies (PHAs). To be accepted into the Homeownership Voucher program, you must to be referred by your local PHA.

Most, but not all, PHAs participate in the program. HUD has a list of participating PHAs on the agency’s website.

Even if a family meets income guidelines, getting into Section 8 housing can be difficult. In recent years, less than 2,000 families nationally have been accepted into the program each year. Participating PHAs maintain waiting lists for the program, which are usually lengthy, often with a multi-year backlog.

Because of the popularity and the demand for affordable housing, local lists rarely open up for additions, and even then, they usually close after just a few days.

Housing Choice Voucher Work, Income, and Down Payment Requirements

To qualify for the Housing Choice Voucher program, at least one person in the household must be working full-time, defined as a minimum of 30 hours a week. There is also a minimum income requirement that the adult family members combined earn at least 2,000 times the federal minimum hourly wage each year.

That averages out close to the traditional definition of full-time work, which is 40-hour work weeks at minimum wage.

Welfare benefits cannot be included in allowable family income unless the family qualifies as elderly or disabled. In those cases, a different minimum applies. The minimum annual family income must be no less than 12 times the monthly Supplemental Security Income benefit for a single individual living alone.

Participants must pay a portion of the mortgage and other monthly housing expenses which is typically based on 30% of the family’s adjusted income. The voucher covers the balance.

Other covered monthly housing expenses include property taxes, homeowners’ insurance, and allowances to cover utility payments and repairs. Principal and interest costs of loans for major repairs or to make the home accessible for a handicapped family member may be included as well.

Qualified participants are required to make a down payment toward the purchase of their new home. They must provide at least 3% of the home purchase price.

At least 1% must come from the family’s personal resources, such as an S8A, IDA, or savings account. The remaining 2% can sometimes be made up with contributions from other qualified programs.

Many states and localities offer separate down payment assistance programs. Those who qualify for the HCV Program will likely meet eligibility requirements for downpayment assistance programs.

Participants must also be a first-time homeowner as defined in HUD regulations, complete a pre-assistance homeownership counseling program required by a PHA, and meet any additional eligibility requirements set by the PHA. 

Finally, a participating family may not have previously defaulted on a mortgage while receiving voucher homeownership assistance. And, no family member may have a current ownership interest in a residence at the commencement of homeownership assistance for purchasing any home.

The 15-Year Limit on Assistance

HVC financial support is not open-ended. Vouchers are provided for up to 15 years, or a maximum of 10 years, if the mortgage term is less than 20 years unless the head of household is elderly or disabled. 

For a standard 30-year mortgage, the homebuyer vouchers only cover half the timeframe. At that point, they must take over responsibility for all mortgage payments, taxes, insurance, and utilities costs on their own.

Selling or Refinancing an HCV Program Home

If the family sells or refinances within ten years of participating in the program, the homeownership assistance provided is subject to recapture.

The recapture amount for sales is the lesser of: 

  • The amount of homeownership assistance provided to the family (reduced after the first year of assistance by 10% each year over a 10-year period) or 
  • The difference between the home’s sales price and the purchase price minus the costs of any capital expenditures, sale costs, and any amounts previously recaptured.

What to Know About Government Rent-to-Own Programs 

Rent-to-own agreements allow you to rent a property for a specified time and then acquire ownership afterward. Every rent-to-own contract differs, so the rental payment period could vary from a few months to several years.

Some of the advantages of rent-to-own assistance programs are:

  • Affords buyers access to live in their home while they are on the way to purchasing it
  • Creates a pathway to buying a house, even with a low credit rating or no credit history at all
  • Allows families to build equity while paying rent.
  • No down payments are required

HUD funds non-profit and other eligible organizations that develop and administer homeownership programs. These organizations then help people purchase and own public housing units.

The rent-to-own agreements that these HUD-funded organizations offer to buyers are mostly similar and follow the same process. These include:

  • Purchase Price: This step involves deciding whether the home’s value will be current or predicted and determining the price.
  • Rent Payments: A percentage of each payment is set aside as equity for the buyer’s future house purchase. Because of this, monthly rent payments for rent-to-own programs are usually higher than normal rents.

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