Getting a Home Loan or Mortgage For People With Disabilities

The American dream of buying a home does not have an asterisk.

Sadly though, many of the 54 million Americans who live with disabilities do not own their own home, which means they do not enjoy the benefits of their own space and place.

The challenges to find that home are real. The disabled must find spaces that fit their needs. If they are receiving Social Security Disability Insurance or Supplemental Benefits, they must wander the maze of government regulations to find home loans for disabled.

And then there are financial challenges; one in three disabled lives at or below the poverty line.

However,  with attention to detail and proper financial planning, those with disabilities can find the loan that allows them to buy their home.

Federal laws are written to ensure the disabled have fair access to home loans, and are not discriminated against. Financial wherewithal is needed to afford the mortgage; with some loans so is proof of disability. Some federal agencies offer programs to help, and nonprofit private organizations have programs specifically to help the disabled, veterans or the homeless.

Everyone deserves the right to buy and live in a house they call home. Understanding the process and what is out there is key to achieving that dream.

Among the considerations:

• Understanding the homebuying process
• Can You Buy A House While On Disability Income?
• Understanding Your Rights
• Mortgage & Loan Programs for People with Disabilities
• Other Mortgage & Loan Assistance Options for People with Disabilities

Purchasing a Home

Any homebuyer goes through similar steps when buying a home. While it may seem complex when you begin taking the steps for your first purchase, the process does not have to be daunting. The starting point is knowing your credit score and budgeting what you can afford.

The credit score will reflect your ability to repay a loan; the higher the score, the easier you’ll be approved because it’s more likely you will repay the loan. l Those with the highest credit scores qualify for a lower interest rate, and in early 2021 rates already are at attractively low levels.

Budgeting to know what you can afford is vital. The first step would be to create a budget that lists regular expenses, and how much  you might expect to pay with a home payment that includes loan principal, interest, taxes and insurance. A mortgage calculator is a big help here.

Once you have a budget, consider being pre-approved for a mortgage. That tells a seller what you can afford, and that you are serious about buying. Study loan rates in your area and closing costs to determine the best loan for you before applying. Consider how much money you may have for a down payment; typically those who can put down 20% of the purchase price avoid the added monthly cost of private mortgage insurance.

Next, think about what kind of home you want. For those with maneuverability issues, a one-story ranch may make more sense than a multi- or split-level structure. Consider the size of home, yard, location and typical considerations like number of bedrooms and bathrooms. A realtor can help find the home with the right qualifications.

Once negotiations are complete and the price is agreed to, insist on a home inspection. Nobody wants to walk into their new home and find structural issues hidden behind walls. An inspection also may allow you to negotiate a lower price, if problems are discovered.

Those who need support and assistance can find it from the office of Housing and Urban Development (HUD), which sponsors agencies nationwide that offer advice and guidance. A nonprofit credit counselor can help sort through assets and liabilities to firm up the budget.

Breaking the process down to individual steps can ease the mental burden. Look at the entire process like eating a double-decker cake – one bite at a time.

Can You Buy A House while on Disability Income?

The answer to one of the key questions asked by the disabled is yes, you can buy a home while on disability income.

Social Security Disability Income (SSDI) is paid to individuals younger than 65 as a result of being disabled. This money can be used to purchase a home as long as the buyer’s credit score allows for the loan. The challenge a buyer faces, though, is the uncertainty about how long the SSDI income will continue. SSDI requires regular reviews to ensure the income benefit is warranted.

Supplemental Security Income (SSI) benefits are paid to those over 65 or those who are blind or disabled with little income. These funds can be considered by lenders when applying for the loan to buy a home, but there are practical hurdles in the process. For one, those who qualify for SSI generally do not have a lot of income. In addition, SSI limits the assets one can have to receive the money. To qualify, one must not have individual assets worth more than $2,000, or $3,000 if married. Though not all assets count toward this number, those receiving SSI  usually are limited financially and find it difficult to come up with the money for a down payment.

Long-term disability from an employer also can be included on a loan application. But each lender makes its rules, and some may disqualify you for the loan based on income type. Researching loans before applying can help, but if a lender says no, that should not stop you from looking elsewhere.

When buying a house on disability benefits, the disability income has to be documented for a lender. This may mean providing a disability policy or statement from an employer, as well as any relevant documents for SSI and SSDI, which could be an award letter from the Social Security Administrator or a receipt.

Financial assistant for the disabled is available, A financial or housing counselor can help navigate these waters.

Understanding Your Rights

Federal law requires equal housing opportunities. Knowing your rights before proceeding can avoid a problem later. For instance, if you buy a home in a community that has a homeowners association, the law allows you to make “reasonable accommodations” (a ramp at the entrance, accessible parking, etc.) to your residence that take precedence over guidelines or policies of the HOA.

Other laws all disabled individuals should be aware of include:

• The Equal Credit Opportunity Act (ECOA): Ensures protected classes, including the disabled, do not face discrimination when applying for a mortgage. The Federal Trade Commission (FTC) lists important information on mortgage discrimination
• Section 504 of the Rehabilitation Act of 1973: This law makes sure everyone has the same access to financial help from HUD.

An attorney, state or federal agency, or a disability advocacy group can help you understand these laws. The National Disability Rights Network may be a good place to start.

The Fair Housing Act

The Fair Housing Act is an important law that prohibits housing discrimination based on disability, race, religion or sex. The law also requires that homes built after 1991 meet accessibility standards; those standards cover entrances, common and public areas, doorways, reachable thermostats and switches, and accessible kitchen and bathroom space. Alcoholism and addiction are considered a disability under this law.

Americans with Disabilities Acts (ADA)

The Americans with Disabilities Act (ADA) is designed to protect against discrimination toward the disabled in public places like government buildings, commercial facilities, transportation and accommodations.

Mortgage & Loan Programs for People with Disabilities

Choosing the right mortgage could be the most important step in the home-buying process. One can select from many different types or mortgage programs.

Federal government options include:

• Fannie Mae. This government organization (along with Freddie Mac) backs most of the country’s home loans. Obtaining a home loan backed by Fannie Mae can be a big help to those who cannot afford to put down a sizeable down payment. The HomeReady Mortgage from Fannie Mae requires only a 3% down payment – which is $4,500 if the house costs $150,000. Grants, including disability home loans grants, can be used to pay the entire down payment. Non-occupant co-buyers also could qualify for the loan, which means a family member or close friend willing to offer their credit and financial history can help secure the loan. Fannie Mae also can be a help to parents buying a home for a disabled child.
• The VA. Veterans with a disability can pursue a number of Veterans Administration programs or loans that can help. A very attractive option is the VA Loan program, which does not require a down payment and offers low rates. Disability income can be used on the application, and the loan funding fee is waived. Other ways the VA can help include grants for disabled homeowners (which do not need to be repaid) to adapt the house to the disability and a temporary residence adaptation grant when an individual is living with a relative.
• The USDA. The U.S. Department of Agriculture offers two major programs that can help. The Housing Guaranteed Loan Program offers loans to low-income applicants who live in eligible rural communities. The Housing Repair Loans and Grants provides money to repair, modernize and make safe homes of those with low incomes. Typically USDA home loans require a credit score of 640 or higher, and that the home be in a USDA-approved rural area. Applications must be made through the local Rural Development Office.
• HUD housing choice vouchers. These vouchers go to first-time buyers who have completed the Public Housing Agencies counseling program. These Section 8 vouchers can help pay the mortgage, but are available only to those who qualify or would have qualified for HUD rental assistance. Applications must be placed through the local Public Housing Agency, but not all local agencies participate, and those that do may have lengthy wait times.
• FHA loans. Federal Housing Authority loans are for those whose credit score is lower, or who have debt. There are several requirements for these FHA backed and insured loans, among them a credit score of 580 or higher with a down payment of 3.5%, an appraisal by an FHA inspector and that the buyer reside in the home within 60 days of closing. Those with a credit score between 500 and 579 can qualify with a 10% down payment. SSI and SSDI income can be used for FHA loans.

Other Mortgage & Loan Assistance Options for People with Disabilities

Several charitable nonprofits help with housing for the disabled. All do admirable work for those in need. Among them:

• Habitat for Humanity. This global nonprofit works locally to “rehabilitate” homes for those in need of better housing. If you’re willing to get involved in the work – to the extent you can, which doesn’t always mean physical labor – this is a good option. The well-known nonprofit builds or refurbishes accessible homes and provides affordable mortgages to those who qualify.
• Homes for Our Troops. This nonprofit builds and donates adapted mortgage-free homes to retired or retiring veterans injured on duty after Sept. 11, 2001. Requirements include a letter of eligibility from the VA and that the home be the primary residence.
• With its wide network of local chapters, AmeriCorps tries to encourage communities to help by renovating homes for families with one or more disabled individuals. Inquire about this help through a local AmericCorps office.
• National Center for Healthy Housing. Provides information and guidance to those who need housing better adapted to fit their needs.
• National Low Income Housing Coalition. This organization works to enact policies that ensure the poorest in the country have access to good, affordable homes.
• American Association of People with Disabilities. An advocacy group for the disabled that provides a number of programs and resources.
• A Home for Every Vet partners with Built for Zero and operates with the slogan “from experiencing homelessness to ending it.”