How to Buy a Home With a Low Income

1. Find out what counts as low income for homebuying in your area

Each year, the U.S. Department of Housing and Urban Development (HUD) sets Area Median Income (AMI) limits based on the latest median family incomes in each county or metro area. In 2025, AMI hovers around $132,400 for a family of four in places like Twin Cities, Minnesota, but jumps to $145,800 in New York City.

“Low income is all relative to where you live,” said Steven Glick, HomeAbroad’s director of mortgage sales. “AMI is basically the midpoint of what families earn in your county or metro area, adjusted for household size.”

Low income typically means 80% of AMI or less. So, if your AMI is $100,000, you’re looking at $80,000 for a family of four. But it varies — some low-income programs extend eligibility to 120%.

Where you live determines which programs you can access and what you’ll pay.

Shawn King, a co-founder of affordable housing innovator Arrive Home, noted that borrowers may have access to special programs through federal, state or local housing finance agencies that target areas in need of assistance. “These can range from grant funding for down payment assistance to lower interest rates for mortgages,” he said.

Tip: Find your area's current income limits using HUD’s income limits tool or Fannie Mae’s AMI lookup tool. These numbers adjust annually, so check each year.

2. Assess your low-income homebuying approval chances

“When you apply for low-income homebuyer programs, your lender looks at key financial details to see if you qualify and can afford the loan,” said Debbie Calixto, a loanDepot sales manager in Indiana Wells, California.

Here are the top three personal finance areas to prioritize before applying for a home loan:

Credit score

Your credit score opens or closes program doors. FHA loans can accept people with scores as low as 580 for 3.5% down, or 500 if you can put down 10%. Conventional loans usually require a 620, though some state programs can accept lower with compensating factors like steady employment.

“A solid 620-plus score unlocks better rates,” Glick said.

Most down payment assistance (DPA) and income-based loan programs set minimum credit scores ranging from 600 to 640. “Even if your score is below 640, some lenders have access to flexible underwriting or credit improvement resources to help you qualify,” noted Calixto.

Tip: Check your credit report for free through AnnualCreditReport.com and dispute any errors. To build a positive history and boost your credit score, make all payments on time and keep your credit utilization ratio less than 30% for at least three months.

Debt-to-income (DTI) ratio

Your debt-to-income (DTI) ratio shows whether you can afford the monthly payment. Add up all your recurring monthly debts — car loans, credit cards, student loans and child support — and divide it by your gross monthly income.

Here are the DTI ratio limits for some common programs:

• FHA: 31% toward housing costs, 43% toward other long-term debt
• VA: 41% (not technically a limit, but you’ll face more scrutiny if you have a higher DTI)
• Conventional: 36% to 50%

“Most DPA programs require lower DTI ratios than standard loan programs to ensure you can comfortably afford your new home,” Calixto explained.

Tip: Don’t fret if your DTI ratio is too high. Glick advised focusing on paying down high-interest debt, including credit cards, while making minimum payments on other balances. Also, consider income growth opportunities, such as a promotion or part-time work, and delay major purchases until after closing. Many buyers qualify after three to six months of these focused efforts.

Available savings

Savings requirements depend on your loan type. USDA and VA loans need zero down, while FHA asks for a 3.5% down payment. But every program requires cash for closing costs — typically 2% to 6% of the purchase price.

“Savings are still needed for deposits, inspections, appraisals and reserves even with down payment assistance,” said Rod See, senior vice president and managing director of the community lending division at Cornerstone Home Lending in Arlington, Texas. Low savings is the most common obstacle he sees among low-income buyers.

Tip: Budget your monthly housing payment at around 30% of gross income. Set aside an additional 1% to 3% of your home’s value annually for property taxes, insurance and repairs.

3. Explore the best low-income home loan and assistance programs for buyers

Choosing between FHA, USDA, VA and down payment assistance programs depends on where you're buying, your military status and how much help you need with upfront costs.

FHA loans work nationwide with accessible credit requirements but carry mortgage insurance for the life of the loan if you put down less than 10%. “Credit scores as low as 580 — possibly even down to 520 — may qualify, with higher DTI flexibility than most conventional loans,” said Calixto.

USDA loans eliminate the down payment but restrict eligibility to rural and suburban areas. Borrowers must meet moderate-income limits, typically at or below 115% AMI, and properties must be in USDA-eligible rural areas.

VA loans offer zero down with no mortgage insurance but charge a one-time funding fee and require military service eligibility. “VA loans offer some of the best terms in the market with flexible credit requirements and competitive interest rates for eligible borrowers,” Calixto noted.

Down payment assistance programs layer on top of these base loans, offering $5,000 to $100,000 in grants or forgivable loans to cover upfront costs. There are more than 2,000 DPA programs nationwide, according to King.

Assistance comes in two forms: grants that don't need repayment, or second mortgages with payment obligations. Most require homebuyer education and first-time buyer status, though "first-time" often means anyone who hasn't owned a home in three years.

Reference this comparison table to find which programs match your situation:

4. Look into community resources for buying a home with low income

As you prepare to apply and make offers, connect with local resources that can guide you through the process and help you access programs you might otherwise miss.

“The most important person is the lender who specializes in low-income and down payment assistance programs,” said See. “A good loan officer helps you qualify strategically and with long-term affordability in mind.”

Beyond your lender, Glick recommended building a team that includes a buyer's agent, home inspector and specialized support professionals.

Here are other resources you can lean on for support:

• HUD-approved housing counseling agencies: Government-certified counselors provide free budget audits, mock applications and post-purchase check-ins. Search HUD's database for local approved counselors who offer pre-purchase counseling and financial literacy education.
• NeighborWorks America: It operates more than 250 local organizations offering homebuyer education and affordable lending programs. “Free workshops can help build your credit by 50-plus points,” noted Glick. They also help match buyers to down payment assistance programs and prevent scams.
• Community Development Financial Institutions (CDFIs): Some CDFIs work with credit scores as low as 500 and offer rates about 0.5% lower than traditional lenders, though processing may take longer. “They’re especially valuable for buyers with nontraditional income or barriers to conventional financing,” explained See.
• Local housing authorities: They maintain updated lists of city and county programs, assistance amounts and application deadlines.

5. Make a competitive offer as a low-income home buyer

In a competitive market, preparation and presentation make your offer stand out. “Low income doesn't mean low-ball,” Glick emphasized. “Pre-approval plus DPA makes you shine.”

Strengthen your position to buy a house by taking these steps:

• Get fully underwritten, not just pre-approved: Ask your lender for a full underwriting approval. “This means your income, assets and credit have already been reviewed and approved by an underwriter,” explained Calixto. “Your offer is nearly as strong as cash because financing risk is significantly less.”
• Present DPA as secured funding: Provide program documentation upfront to show preparedness and emphasize that your funding source is locked in.
• Request seller concessions strategically: FHA allows sellers to contribute up to 6% of the purchase price toward closing costs. “Request only what's necessary,” Calixto advised.
• Never waive inspections: Home inspections cost $300 to $500, but can identify thousands in needed repairs. “I’ve caught termites that saved a client $15,000,” Glick told us. Include appraisal and financing contingencies, but tighten timelines to show confidence.

During the negotiation process, watch out for these contract red flags:

• Sellers requiring you to waive all contingencies
• Pressure to close in under 30 days without proper due diligence
• “As-is” clauses that prevent requesting repairs (which can hide $20,000-plus in issues, Glick cautioned)
• Properties priced well below market with known major issues

Finally, “to ensure stability, never purchase at the top of your approval amount,” See warned. “Build an emergency reserve for rising taxes, insurance and home repair costs.”