Loan Programs Can Help Disabled Homebuyers
Nearly one in five people in the United States are living with a disability, according to Census Bureau data. That’s about 56.7 million people — or 19 percent of the population — who may need more help than others when buying a home.
Buying a home for the first time can be challenging for anyone, but it can be especially complex for a disabled person to wade through the programs available to help the disabled buy homes.
“I think the biggest obstacle would be lack of knowledge,” says Cynthia Sirico, a mortgage banker at Corridor Mortgage Group in Hauppauge, NY.
Here are some ways disabled homebuyers can seek help:
Federal protections and assistance
Federal law protects the disabled from being discriminated against in many ways, including when buying a home. The Fair Housing Act prohibits lenders, sellers and real estate agents, among other housing providers, from discriminating against the disabled in any part of the home buying process.
Disabled buyers also can’t be discriminated against by preventing them from making reasonable modifications to the property, such as accessibility ramps.
The Fair Housing Act requires that builders of multifamily residences to meet certain accessibility standards. These include an accessible entrance, wide doors for wheelchairs, accessible routes through homes, and light switches and thermostats that are accessible to the disabled.
The Department of Housing and Urban Development, or HUD, offers help from housing counselors it has trained to help disabled people buy homes. These HUD-approved housing counselors can be found in each state and provide advice on buying a home, renting, defaults, foreclosures and credit issues.
Another HUD program — the Section 8 Homeownership Voucher Program — helps low-income people to rent or buy a house by subsidizing their monthly mortgage payments.
Homebuyers with a low income can have difficulty getting a home loan, and unfortunately, people with disabilities earn less on average than most Americans.
Workers with disabilities who have at least a high school education earn 37 percent less on average than their peers without disabilities, according to an analysis by the American Institutes for Research. That difference averaged $6,505 less in 2011, and the gap widens to nearly $21,000 on average for people with advanced degrees.
The economic discrimination is similar to the 35 percent less pay that female employees earn.
Less income can lead to higher debt, and a high debt-to-income ratio is the top factor preventing risk managers from approving loan applications.
A debt-to-income ratio is your monthly debt payments divided by gross monthly income. The higher the percentage, the more likely you’ll be considered by mortgage lenders to have trouble making monthly payments. A 43 percent ratio is the highest ratio a borrower can have and still get a Qualified Mortgage, though there are some exceptions.
Lenders don’t want a preponderance of income going to housing, says Sirico, the mortgage banker. For someone with a permanent injury whose only income is from Social Security, a debt-to-income ratio of 43-45 percent is allowed, Sirico says.
For a disabled homebuyer with a ratio as high as 50 percent, the Fannie Mae HomeReady program allows the income of someone else who is living in the home wiht the borrower to be considered household income, Sirico says. This extra income from someone who doesn’t own the home but lives in it can help the borrower qualify.
Down payment assistance and other programs are offered by states, local community groups and national organizations. Individual Development Accounts, or IDAs, help low-income families buy homes by giving them grants for a down payment.
Programs differ by state. Connecticut’s Home of Your Own program offers below-market interest rates, and Alabama’s exempts the disabled from paying property taxes.
Habitat for Humanity is a global organization that builds accessible homes for people in need. It selects family based on demonstrated need, willingness to put in “sweat equity,” and their ability to repay an affordable mortgage, according to the group. Homes are generally sold for the cost of building them, with low down payments and mortgage assistance.
Local Habitat offices have the flexibility to create their own underwriting policies, says Talia Moffitt, a spokeswoman for Habitat, based in Atlanta.
“To ensure monthly payments under Habitat mortgages are affordable for our families, Habitat policy provides for target debt-to-income ratios that are consistent with industry standards,” Moffitt says. “We encourage our local offices to discuss with potential Habitat owners what their plan is to repay outstanding debt and to factor those payments into underwriting decisions.”
Disabled veterans can get home loan assistance with a Specially Adapted Housing Grant from the U.S. Department of Veterans Affairs. The grants can be used to build or remodel a home for disabled access, or can be used toward an existing mortgage that’s adapted for disabilities.
In fiscal year 2016, the veterans’ program allows up to $73,768 per grant for a veteran buying their own home, and up to $32,384 if they adapt a family member’s home they’re living in.
When trying to buy a home as a disabled homebuyer, the process and all of the assistance programs can be daunting. Asking for help and having a family member help you along the way may be the best ways to get started.
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