Many recipients of the Social Security disability benefits or Supplemental Security Income (SSI) mistakenly believe that their dream of homeownership is out of their reach. Although buying a house while on disability or SSI is not an easy task, it is nevertheless doable.
So how can you qualify for a home when receiving disability or SSI?
Those who receive disability benefits or SSI might not qualify for a traditional conventional mortgage, but chances are that they are eligible for different programs that will help them become homeowners.
1. How to save for a down payment while on disability or SSI?
One of the hardest things to do when you are on a limited budget is saving for a down payment while renting a home or an apartment.
In addition, one of the obstacles the aspiring homeowner will encounter early on is the rule established by the Social Security Administration that prevents SSI beneficiaries to have more than $2,000 in assets if a single person, or more than $3,000 if a married couple. This rule does not include a house if it is used as a primary residence, but it will affect the ability of the beneficiary to save for a down payment. Individuals receiving Social Security Disability insurance (SSDI) are not subject to the same asset limits.
Thankfully, several programs conceived for people on disability or SSI only require a very low down payment or will help with some creative financing solutions to qualify.
If you receive disability, the FannieMae Community Home Choice program might be a good fit for you. It allows individuals with a low credit score to qualify for a home loan under certain conditions and only requires a down payment as low as $500 in some cases, well below the $2,000 assets limit.
The Individual Development Account programs (IDA) are designed to help individuals facing hardship such as disability to build financial capacity. They vary by state. Some will match part at the money you put in the account if destined to be used as a down payment. This way, your benefits will not go down but in many cases will go up as they do not count toward your income or resources.
2. Which can programs help individuals receiving disability or SSI qualify for a home?
Besides receiving help for a down payments, you can also find alternatives to traditional mortgages to qualify for a home.
Some local Section 8 offices participate in the Housing Chance Voucher program which covers, among other things, your mortgage principal and interest and mortgage insurance. If you are a recipient from Section 8, it is worth checking if your local Public Housing Authority takes part in this program and if you qualify. If you do, you could pay as low as 30% of your adjusted monthly income for your housing. This program is run through Housing and Urban Development. It allows families with a person with disability, who is not currently receiving housing assistance, to begin receicing affordable housing assistance.
The developments that are covered under this include; Section 8 new construction projects, Section 8 substantial rehabilitation projects, state housing agencies section 8 projects, etc. Those looking to inquire about this option will need to contact their local Public Housing Assistance.
Habitat for Humanity offers a program designed to help low-income families including those receiving Social security disability to achieve home ownership thanks to low-interest mortgages ranging from seven to thirty years as long as the future homeowner is willing to put in some “sweat equity” by either taking an active part in building his own home or others, or volunteering in a Habitat ReStore. Rebuilding Together for AmericaCorps is another organization that aims to revitalize affordable housing for low income families. One of its efforts that the organization prides itself on is building affordable homes for families with one or more persons with disability.
If you are interested in buying a house outside of city limits, you might qualify for a USDA loan under their Guaranteed program if your income is below 115% of your Area Medium Income (AMI) or their Direct program if your income is between 50 and 80% of the AMI. According to Mortgage reports, under this program, individuals may not even need a down down payment and their interest rates can be as low as 1%. Of course, there are applicant requirements that must be met, as well as property requirements.
Veterans might be eligible for some specific programs such as VA Home Loans for Disabled Veterans or Homes for our Troops.
While SSI has a strict income limit in order to qualify, as of 2019 there is an earned income exclusion which allows individuals with only one income from work to earn up to $1,625 per year to still be eligible for small SSI benefit payments. By this, Social Security allows you to deduct part of your income from being counted toward SSI. From that, it makes the recipient entitled to a larger SSI payment.
3. Buying a home while on SSDI
Social Security Disability Insurance is a supplemental income for people with disability under 65. One main difference between those on SSI and those receiving SSDI is that SSDI recipients must have work credits. What makes both programs tricky in terms of being able to save up for a down payment on a home is that neither provide a long term outlook. The Social Security Administration strictly looks at whether someone is currently receiving benefits, not whether they will continue to do so down the road.
Another difference is the assets limit. While SSDI is a difficult process initially when applying, recipients often are granted lofty back payments. With no assets limitations such as under SSI, it is much easier to save to buy a house. For those on SSDI, if you buy a home but do not live in it, it will not count against you.
Although achieving home ownership can seem daunting while you are on disability or SSI, there are numerous programs that can help you qualify for a home. There are lots of organizations that will help you in the process. Check out some of these programs and see which ones you are qualified for and begin your application.