Can You Buy A House On Disability? Everything To Know

If you have a disability, you may wonder if you can purchase a home. After all, conventional advice says that you must have a steady job to qualify for a mortgage.

So, can you buy a house on disability? The answer is yes but read on for more information about buying a home on disability.

Can You Buy A House On Disability?

Yes, you can buy a home on disability income. Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) recipients can use their benefits to qualify for a mortgage and become homeowners.

It’s possible to buy a house on disability, but what exactly are disability benefits? You may be intimately familiar with them, but just in case, here's a quick definition of SSDI and SSI:

• Social Security Disability Insurance (SSDI): SSDI provides monthly payments to individuals with a disability that limits (or even stops) their ability to work.
• Supplemental Security Income (SSI): SSI offers monthly payments to people with disabilities (such as blindness) and older adults (65 or older) who have minimal income or resources.

Again, you list these benefits in the "income" column when you apply for a home, just as you would when you list regular earned income.

Home Loan Options For People With Disabilities

You may consider the following home loans for disabled individuals: conventional loans, Fannie Mae HomeReady^® loans, FHA loans, VA loans or USDA loans.

Conventional Loans

Conventional loans are mortgages you get through a private lender not backed by a government agency. Most conventional loans are also "conforming," which means they meet the Fannie Mae or Freddie Mac requirements (or government-sponsored enterprises) which purchase mortgages from lenders and sell them to investors.

Conventional loans typically require a credit score of at least 620. They also usually require a debt-to-income ratio (the relationship between your debt and income) of up to 50% DTI, but a lower DTI would be better.

Finally, you'll need a down payment as low as 3%, but the down payment amount can vary based on your personal situation and your property or loan type.

Fannie Mae HomeReady^® Loans

Fannie Mae HomeReady^® loans are a special type of conventional home loan designed for low-income borrowers who have good credit.

The minimum credit score requirements are the same for conventional conforming loans, but they offer higher loan-to-value (LTV) ratios. The LTV percentage measures the loan amount you need to borrow against the appraised value of the home you want to buy. Loan costs can also be lower.

Fannie Mae HomeReady^® loans also offer lower, more flexible down payment options.

FHA Loans

Federal Housing Administration (FHA) loans are popular among first-time home buyers and those with low to moderate incomes. FHA loans are backed by the Federal Housing Administration, an agency under the jurisdiction of the U.S. Department of Housing and Urban Development (HUD). In this case, the government protects the lender against default.

FHA loans allow for lower credit score and down payment requirements than traditional conventional loans. You must typically put down 3.5% for a down payment with a score of 580 or better and a DTI as high as 57%. Although our friends at Rocket Mortgage^® don’t approve anything below 580, you can get an FHA loan with a credit score as low as 500 with 10% down.

Note that FHA loans come with a mortgage insurance premium (MIP) as part of an FHA loan, including an upfront and monthly MIP. The upfront MIP is 1.75% of the loan amount and the monthly MIP typically runs between 0.15% – 0.75%.

VA Loans

Department of Veterans Affairs (VA) loans are mortgages for veterans, active service members and spouses who qualify. They are backed by the U.S. Department of Veterans Affairs (VA) but issued by private lenders.

Your lender will typically require a credit score between 580 – 650, DTI below 41%, no down payment (unless your lender deems it necessary) and steady employment history over at least 2 years. With a service-related disability, you may not have to pay the required funding fee, a fee that ranges between 0.5% – 3.3%.

USDA Loans

U.S. Department of Agriculture (USDA) loans are typically for those who want to purchase a home in a rural area in the USDA's rural-designated areas. USDA loans are low-interest loans without a down payment at a favorable interest rate. Most lenders require borrowers to have a credit score of at least 640 for a USDA loan.

You must also meet certain income limits posted by the USDA.

Disability Home Loan Grants And Programs

Are disability home loans grants available?

Let's look at programs and grants a home buyer with a disability can consider, including the HUD Housing Choice Voucher Program, Habitat for Humanity, Homes for Our Troops and the Specially Adapted Housing (SAH) or Special Home Adaptation grant.

HUD Housing Choice Voucher Program

The Housing Choice Voucher program (also called Section 8) is housing assistance issued by a local Public Housing Authority through HUD, which provides rental or homeownership assistance for individuals with a low income.

A Section 8 voucher shows the amount of homeownership or rental assistance you get through HUD, which you can present to your mortgage lender. Homeownership assistance payments either go to you or directly to your lender.

You can qualify for the Housing Choice Voucher Program based on your income. To qualify for the program, you can't make more than 50% of the area median income where you live. You must also live in the U.S. or a territory of the U.S., not have an eviction history or criminal record in your family and certain public housing agency (PHA) standards.

Habitat For Humanity

Habitat for Humanity, a global nonprofit organization, helps families who need decent and affordable housing. They also help build their own homes alongside volunteers.

Habitat for Humanity is a global nonprofit housing organization working in local communities across all 50 U.S. states and approximately 70 countries.

Down Payment Assistance

Down payment assistance programs may help you pay down payment and/or closing costs. You typically must be a first-time home buyer, live in a certain area, attend a class on homeownership, have a certain income level or occupy your property as a primary residence for a certain period of time.

You can look for a down payment assistance program or grants through local housing authorities, nonprofits and other groups through HUD's local home buying assistance directory. Lenders also sometimes offer their own assistance.

Specially Adapted Housing (SAH) Or Special Home Adaptation (SHA) Grant

Veterans or service members with a service-connected disability may be able to get a housing grant from the VA, either the Specially Adapted Housing (SAH) or the Special Housing Adaptation (SHA) grant.

• SAH: An SAH grant can help you build an adapted home on land, remodel an existing home or apply the grant to the mortgage balance of an adapted home. 
• SHA: A SHA grant can help you adapt the home you currently own, a home you plan to buy or help you buy a home to live in that already has adaptations.

You must meet specific disability requirements to qualify.

Housing Rights For People With Disabilities

Ensure you know your housing and mortgage loan rights before you purchase a home with a disability:

• The Americans with Disabilities Act (ADA): The ADA protects Americans with disabilities from discrimination, including discrimination in their ability to purchase a home. Lenders cannot refuse financing due to your disability.
• The Fair Housing Act: The Fair Housing Act protects you from discrimination when renting or buying a home, getting a mortgage, seeking housing assistance or other housing activities. It protects you from discrimination in housing due to race, color, national origin, religion, gender, family status and disability.
• Section 504 of the Rehabilitation Act of 1973: Section 504 of the Rehabilitation Act of 1973 protects qualified individuals from disability discrimination. It forbids organizations and employers from excluding or denying program benefits and services to those with a disability.
• The Equal Credit Opportunity Act (ECOA): The ECOA prohibits creditors from discriminating against a person who applies for credit based on disability. They cannot discriminate against you based on race, color, religion, national origin, gender, marital status, age or whether they receive income from a public assistance program.

If you suspect you have experienced discrimination, seek a local attorney.

Tips For Buying A Home

Now, here's a quick tutorial on the home buying process and some tips for home buyers:

• Get preapproved: Preapproval means a lender reviews your credit report, income, assets and debt and determines the amount you'll be able to afford when looking to buy a home. Getting preapproved is important for home buyers because it helps you determine your home purchasing budget. Conversely, it also helps you sniff out issues that could prevent you getting financing.
• Improve your credit score: Knowing and improving your credit score is important for home buyers. Your credit score is a three-digit number that determines how well you tackle debt now and in the past. You can improve your credit score by making payments on time, use less of your available credit, keep credit cards open, refrain from applying for new credit and have a mix of different types of credit.
• Have a down payment ready: Saving for a down payment is important for home buyers. You will likely pay at least 3% for a conventional mortgage but remember that you will pay private mortgage insurance (PMI) for a period if you don't put down at least 20%.
• Reduce your debt: Consider lowering your debt-to-income ratio (DTI). You can figure it by dividing your regular, recurring monthly debt by your income. Most lenders like to see a DTI of 43% or less, depending on the type of loan and the lender itself.
• Compare multiple lenders: Don't just go to one lender and go with them. Compare multiple mortgage lenders so you compare multiple items, including interest rates. Comparing several lenders will ensure you're getting the best lender for you.

Buying A Home On Disability FAQs

Check out the following frequently asked questions about buying a home on disability.

Can I own property while on disability?

Yes, you can own property while on disability income. However, your benefits program may reevaluate your eligibility for disability benefits, especially if the program has asset restrictions, which owning a home may impact.

Can I fund home modifications for accessibility?

Yes, home modifications for people with disabilities financial assistance programs exist. You can qualify for a housing grant for disabled veterans, rural housing repair loan and grant programs, grants from private foundations and more. Visit the National Resource Center on Supportive Housing and Home Modification to learn more about getting help for home modifications. HUD also offers helpful information.

What are disability loans?

A disability loan is a personal loan used to cover costs before receiving disability benefits, costs not covered by insurance or other personal costs. It is an installment loan, meaning you borrow money from a lender and pay it back within a predetermined time. It may be secured or unsecured, meaning it may or may not be backed by collateral. You must meet your lender's requirements to qualify for a personal loan, which usually includes a credit score in the low 600s to qualify.

Are there tax benefits for homeowners with a disability?

You may be able to claim certain home improvements as a medical expense deduction, such as adding a wheelchair ramp or widening doorways. They must accommodate a disability. Learn more by checking out IRS Publication 502.

What are the challenges of buying a house on disability?

Home buyers with a disability face the usual challenges of having to figure out how to fund a down payment and closing costs. However, you also have to consider other expenses such as how much it’s going to cost to modify the home to best meet your needs. Additionally, factor in the costs of any caregiving you may need to move out on your own. Everyone is different.

The Bottom Line

Can you own property while on disability?

Absolutely.

The more you know, the better decisions you can make. Inform yourself – read about home buying and mortgage processes, understand how you might benefit from nonprofits and federal programs and more.

With the right resources and support, homeownership is attainable for home buyers with disabilities. Start on a mortgage application today.