10 Best Home Loans for Low-Income Borrowers of 2025

If you’re working with a limited income, the dream of owning a home might seem out of reach. Between saving for a down payment and meeting credit or income requirements, it’s easy to feel like homeownership isn’t achievable. However, there are various loan programs specifically designed to help low- and moderate-income borrowers purchase a home.

These programs offer benefits like low down payments, reduced interest rates, and even grants or assistance to cover upfront costs. Whether you’re a first-time buyer or someone looking to buy again, you’ll find options tailored to meet your needs.

In this article, we’ll explore 10 of the best home loan programs available in 2025, including government-backed loans like FHA, VA, and USDA loans, as well as innovative options like Fannie Mae’s HomeReady program and state-specific assistance programs. These loans can make homeownership more accessible and affordable than you might think.

10 Programs to Help Low-Income Buyers Become Homeowners

Even if you have a limited income, there are mortgage programs specifically created to make homeownership more attainable. These programs offer benefits like flexible credit requirements, lower upfront costs, and financial assistance, helping you take the next step toward owning a home.

1. FHA Loans

FHA loans remain a top choice for low-income buyers because of their relaxed credit score requirements and low down payment options. Backed by the Federal Housing Administration, these loans provide a pathway to homeownership for borrowers who may struggle to meet conventional loan requirements.

Key Features of FHA Loans

• Flexible Credit Requirements: Borrowers with credit scores as low as 580 can qualify with a 3.5% down payment. For scores between 500 and 579, a 10% down payment is required.
• Lower Down Payments: The program allows for down payments as low as 3.5%, making it accessible to those with limited savings.
• Gifted Down Payments: Down payment funds can be sourced from savings, grants, or financial gifts from family members, provided proper documentation is supplied.
• Fixed Loan Terms: FHA loans are typically offered in 15- or 30-year fixed-rate terms, providing predictable monthly payments.

FHA Loan Limits

To reflect rising home prices, the FHA has updated its loan limits for 2025.

• Standard Loan Limit: $472,030 for single-family homes in most areas.
• High-Cost Areas: Up to $1,089,300 in high-cost areas such as parts of California, New York, and Hawaii.
• Special Exceptions: In Alaska, Hawaii, Guam, and the Virgin Islands, limits may exceed high-cost area caps due to higher construction costs.

Visit the HUD website to check the loan limits for your county.

Property Eligibility for FHA Loans

FHA loans are designed for owner-occupied residences. To qualify:

• The home must be your primary residence, and you must occupy it within 60 days of closing.
• Eligible property types include single-family homes, condos in FHA-approved developments, and some multi-unit properties (up to 4 units).
• The property must meet FHA minimum property standards, ensuring it is safe, sound, and secure.

Additional Requirements for Borrowers

• Debt-to-Income (DTI) Ratio: The recommended DTI ratio is 43%, though exceptions may apply if compensating factors are present (e.g., substantial savings or a strong credit profile).
• Mortgage Insurance: FHA loans require both an upfront mortgage insurance premium (UFMIP) of 1.75% of the loan amount and an annual premium that ranges from 0.45% to 1.05%, depending on the loan term and down payment amount.

2. VA Loans

VA loans are a highly affordable option for eligible veterans, active-duty service members, and certain surviving spouses. Backed by the Department of Veterans Affairs (VA), these loans make homeownership more accessible by offering benefits like no down payment and no private mortgage insurance (PMI).

Key Features of VA Loans

• No Down Payment Required: VA loans allow you to finance 100% of the home’s value, making them one of the most accessible programs for low-income borrowers.
• No PMI: Unlike FHA or conventional loans, VA loans do not require private mortgage insurance, which can save borrowers hundreds of dollars each month.
• Competitive Interest Rates: VA loans often feature lower interest rates than conventional loans, helping reduce monthly payments.
• Flexible Credit Standards: While the VA doesn’t set a minimum credit score requirement, most lenders prefer a score of 620 or higher.

VA Loan Limits

Borrowers with full VA entitlement have no loan limits, meaning you can finance a home without worrying about maximum caps. However, if you have a reduced entitlement (e.g., due to an existing VA loan), loan limits will apply.

• Standard Loan Limit (Reduced Entitlement): $472,030 in most areas.
• High-Cost Areas: Up to $1,089,300 for counties designated as high-cost.
• Use the VA’s loan limit lookup tool to check limits in your area if you have reduced entitlement.

Eligibility Requirements for VA Loans

To qualify for a VA loan, you must meet the following criteria:

• Service Requirements:
  • Active-duty service members with at least 90 consecutive days of service during wartime or 181 days during peacetime.
  • Veterans meeting the same service duration requirements.
  • National Guard and Reserve members with six years of service or 90 days of active service (with at least 30 consecutive days).
• Surviving Spouses: Unremarried spouses of veterans who died during service or from a service-related disability may also qualify.
• Certificate of Eligibility (COE): Borrowers must obtain a COE, which verifies their eligibility for a VA loan. This can be requested online, through a lender, or by mail.

Additional Borrower Requirements

• Primary Residence: The home must be your primary residence and occupied within 60 days of closing.
• Debt-to-Income Ratio: While the VA does not set a maximum DTI, most lenders prefer it to be under 41%.
• Residual Income: The VA evaluates residual income (money left over after expenses) to ensure borrowers can afford their monthly mortgage.

VA Funding Fee

The VA funding fee is a one-time cost that helps keep the program running and reduces the burden on taxpayers.

• First-Time Users: 2.3% of the loan amount.
• Subsequent Use: 3.6% of the loan amount.
• Exemptions: Borrowers receiving VA disability compensation or surviving spouses are exempt from the funding fee.

3. USDA Loans

USDA loans are an excellent choice for low-to-moderate-income borrowers looking to purchase homes in eligible rural and suburban areas. Backed by the U.S. Department of Agriculture, these loans offer zero down payment, competitive interest rates, and flexible credit requirements, making homeownership more accessible.

Key Features of USDA Loans

• Zero Down Payment: USDA loans allow borrowers to finance 100% of the home’s purchase price.
• Low Interest Rates: Interest rates are typically lower than conventional loans, reducing monthly payments.
• Reduced Mortgage Insurance Costs: USDA loans require a lower annual mortgage insurance premium compared to FHA loans, helping borrowers save long-term.
• Flexible Credit Standards: While there’s no official minimum credit score, most lenders look for a score of at least 640 to qualify for automated underwriting.

USDA Loan Limits

While USDA loans do not have formal loan limits like FHA or VA loans, the amount you can borrow is determined by your debt-to-income (DTI) ratio, income, and the home’s appraised value.

• Borrowers must ensure their income falls within program limits, which vary by household size and location.
• Income Limits: For 2025, household income cannot exceed 115% of the area median income (AMI). For example, a family of four in most areas can earn up to $103,500 annually, while limits in high-cost areas may go up to $136,600.

Property Eligibility for USDA Loans

USDA loans are designed for homes in eligible rural and suburban areas. To qualify:

• Location Requirements: The home must be located in a USDA-designated area. Use the USDA property eligibility map to confirm if the property qualifies.
• Property Types: USDA loans can be used to purchase single-family homes, condos, modular homes, and even new construction in eligible areas.
• Primary Residence: The property must serve as your primary residence. Second homes, investment properties, and vacation homes are not eligible.

Borrower Eligibility Requirements

To qualify for a USDA loan, borrowers must meet the following criteria:

• U.S. Citizenship or Eligible Immigration Status: Borrowers must be U.S. citizens, non-citizen nationals, or qualified aliens.
• Debt-to-Income Ratio: The DTI ratio is capped at 41% for most borrowers, although exceptions may apply for strong credit profiles or additional income.
• Steady Income: Borrowers must demonstrate a stable income history, typically for the past 24 months.

USDA Mortgage Insurance Costs

USDA loans require borrowers to pay mortgage insurance, but the costs are lower compared to FHA loans:

• Upfront Guarantee Fee: 1% of the loan amount, which can be rolled into the loan.
• Annual Fee: 0.35% of the remaining loan balance, paid monthly as part of the mortgage payment.

4. 97 LTV Purchase Program

The 97 Loan-to-Value (LTV) Purchase Program is a great alternative to FHA loans for low-income borrowers who want to minimize upfront costs. Offered by Fannie Mae and Freddie Mac, this program allows homebuyers to secure a mortgage with just a 3% down payment. It’s specifically designed for first-time homebuyers or those who haven’t owned a home in the past three years.

Key Features of the 97 LTV Program

• Low Down Payment: Borrowers only need to put down 3% of the home’s purchase price, making it a more affordable option compared to conventional loans requiring 5% or more.
• No Upfront Mortgage Insurance: Unlike FHA loans, the 97 LTV program does not require an upfront mortgage insurance premium (UFMIP), reducing upfront costs.
• Competitive PMI Rates: Private mortgage insurance (PMI) is required, but PMI rates are often lower than FHA loans, saving borrowers money over the life of the loan.
• Flexible Sources for Down Payment: The down payment can be funded through personal savings, gifts from family members, or approved grants.

Eligibility Requirements for the 97 LTV Program

To qualify for this program, borrowers must meet specific guidelines:

• Credit Score: A minimum credit score of 620 is required, but higher scores may result in better interest rates and PMI terms.
• First-Time Buyer Status: At least one borrower must not have owned a home in the past three years.
• Property Type: The program is limited to single-unit properties, including single-family homes, condos, co-ops, and planned unit developments (PUDs). Multi-unit properties are not eligible.
• Primary Residence: The home must be the borrower’s primary residence. Vacation homes and investment properties are not allowed.
• Loan Limits: Loan amounts must conform to Fannie Mae and Freddie Mac’s loan limits, which for 2025 are $726,200 in most areas and up to $1,089,300 in high-cost areas.
• Debt-to-Income Ratio: Borrowers must typically maintain a DTI ratio of 43% or lower, though exceptions may be made for borrowers with strong compensating factors.

How the 97 LTV Program Compares to FHA Loans

The 97 LTV program is often considered a more affordable alternative to FHA loans for borrowers with good credit. Here’s how they differ:

• Mortgage Insurance: FHA loans require both upfront and annual mortgage insurance, while the 97 LTV program only requires monthly PMI, which can be canceled once the loan balance reaches 80% of the home’s value.
• Down Payment: Both programs allow for low down payments, but the 97 LTV program has no minimum credit score requirement tied to a higher down payment (like FHA loans’ 10% for credit scores under 580).
• Loan Limits: FHA loans may have lower loan limits in some areas compared to the 97 LTV program, which follows conventional loan limits.

5. HomeReady and Home Possible Mortgages

Fannie Mae’s HomeReady and Freddie Mac’s Home Possible programs are designed specifically for low- to moderate-income homebuyers. These programs provide flexible down payment requirements, affordable private mortgage insurance (PMI), and unique benefits to make homeownership more accessible. They’re a strong alternative to FHA loans, especially for borrowers with good credit.

Key Features of HomeReady and Home Possible

• Low Down Payments: Both programs require just a 3% down payment, making them an affordable option for first-time and repeat homebuyers.
• Flexible Income Sources: Borrowers can include additional income sources, such as income from a roommate or boarder (for HomeReady), to help meet eligibility requirements.
• Lower PMI Costs: Private mortgage insurance for these programs is typically more affordable than FHA loans and can be canceled once 20% equity is reached.
• Down Payment Assistance Allowed: Both programs allow down payment funds to come from gifts, grants, or loans from approved sources.
• Closing Cost Assistance: Sellers can contribute up to 3% of the purchase price toward closing costs, reducing upfront expenses for borrowers.

Eligibility Requirements for HomeReady and Home Possible

These programs share many similarities but have a few unique features:

General Requirements:

• Credit Score: A minimum credit score of 620 is typically required, but a score of 680 or higher can qualify borrowers for better terms.
• Income Limits: Household income cannot exceed 80% of the area median income (AMI). Use Fannie Mae or Freddie Mac’s online tools to check income limits for your location.
• Primary Residence: The home must be the borrower’s primary residence. Investment properties and vacation homes are not eligible.
• Property Types: Eligible properties include single-family homes, condos, co-ops, and certain manufactured homes. Multi-unit properties (up to four units) are allowed for Home Possible but not for HomeReady.

Unique Features of HomeReady:

• Additional Income Sources: HomeReady allows borrowers to include income from roommates or boarders who have lived with them for at least 12 months, making it easier to qualify.
• Homeownership Education: Borrowers must complete a homeownership education course, which provides valuable insights into the buying process and financial management.

Unique Features of Home Possible:

• Flexibility for Multiple Borrowers: Home Possible allows non-occupant co-borrowers (e.g., a parent or family member) to help meet income requirements.
• Low Down Payment Across Property Types: This program allows for just a 5% down payment on multi-unit properties, making it a great option for buyers looking to invest in multifamily homes.

6. HUD Homes

HUD homes, owned by the U.S. Department of Housing and Urban Development (HUD), are properties that have been foreclosed upon due to the homeowner defaulting on an FHA-insured mortgage. These homes are sold at a discount, making them an affordable option for low-income buyers seeking homeownership. HUD’s programs, including special incentives, can help buyers purchase a home with minimal upfront costs.

Key Features of HUD Homes

• Discounted Prices: HUD homes are typically sold below-market value to make them more affordable, especially for buyers in low-to-moderate income brackets.
• $100 Down Payment Program: When financed with an FHA loan, buyers may qualify for this program, which reduces the down payment to just $100.
• Good Neighbor Next Door Program: HUD offers additional discounts of up to 50% for eligible public servants, including teachers, law enforcement officers, EMTs, and firefighters.
• Online Auctions: HUD homes are sold through an online bidding system, with priority given to owner-occupant buyers during the initial listing period.

Eligibility Requirements for HUD Homes

HUD homes are a unique opportunity, but buyers must meet specific requirements:

• Owner-Occupant Status: Priority is given to buyers who will use the property as their primary residence. Investors can only bid if the property remains unsold after the initial owner-occupant period.
• FHA Financing: Many HUD homes qualify for FHA financing, making them accessible to buyers with lower credit scores or limited savings.
• “As-Is” Condition: HUD homes are sold in their current state, meaning buyers are responsible for any necessary repairs or improvements. A home inspection is highly recommended before purchasing.
• HUD Appraisal: Properties must be appraised by an FHA-approved appraiser to ensure they meet minimum safety and habitability standards.

7. Good Neighbor Next Door Program

The Good Neighbor Next Door (GNND) Program, offered by the U.S. Department of Housing and Urban Development (HUD), provides an incredible opportunity for eligible public servants to purchase homes at a 50% discount. This program is part of HUD’s effort to revitalize designated neighborhoods while supporting professionals who serve their communities.

Key Features of the GNND Program

• 50% Discount: Qualified buyers can purchase HUD homes at half their listed price, significantly reducing housing costs.
• Eligible Occupations: The program is available to teachers, law enforcement officers, firefighters, and emergency medical technicians (EMTs).
• Primary Residence Requirement: Buyers must live in the home as their primary residence for at least three years.
• HUD Revitalization Areas: Homes are located in areas identified by HUD as needing revitalization, which often offer lower property prices and opportunities for community improvement.

Eligibility Requirements for the GNND Program

To qualify for the Good Neighbor Next Door Program, applicants must meet the following criteria:

• Professional Eligibility:
  • Teachers: Must be employed full-time in a state-accredited public or private school serving grades pre-K through 12.
  • Law Enforcement Officers: Must be full-time law enforcement officers sworn to uphold the law.
  • Firefighters and EMTs: Must be employed full-time in firefighting or emergency medical response services.
• Property Location: The home must be located in a HUD-designated revitalization area. Use HUD’s online tools to confirm eligible locations.
• Occupancy Commitment: Buyers must agree to live in the home as their primary residence for at least three years.
• Application Timeline: Offers must be submitted through the HUD Homestore website within the seven-day window after the home is listed.

8. State Housing Finance Agency (HFA) Loans

State Housing Finance Agencies (HFAs) offer specialized mortgage programs designed to help low- and moderate-income borrowers achieve homeownership. These state-run agencies provide various assistance options, including affordable loans, grants for down payments, and closing cost assistance. HFA programs vary by state, so it’s worth checking your local options to see what’s available.

Key Features of HFA Loans

• Down Payment and Closing Cost Assistance: Many HFAs provide grants or forgivable loans to cover down payment and closing costs, reducing upfront expenses.
• Competitive Interest Rates: Borrowers can access below-market interest rates, making monthly mortgage payments more affordable.
• Mortgage Tax Credit Certificates (MCCs): Some HFAs offer MCCs, allowing buyers to claim a portion of their mortgage interest as a tax credit, reducing their tax burden annually.
• First-Time Homebuyer Programs: Many HFA loans are geared toward first-time buyers, but some states also extend eligibility to repeat buyers in targeted areas.

Eligibility Requirements for HFA Loans

Eligibility for HFA loans depends on the state program, but here are the general requirements:

• Income Limits: Borrowers must meet income guidelines, which typically vary based on household size and local median income. These limits often allow low- and moderate-income families to qualify.
• Purchase Price Limits: The home’s purchase price must fall below the program’s maximum limits, which vary by state and county.
• Primary Residence: The property must be your primary residence. Second homes and investment properties are not eligible.
• Credit Score: Most programs require a minimum credit score, usually around 620 or higher. Borrowers with lower scores may need to complete homebuyer education.
• Homebuyer Education: Borrowers are often required to complete a homebuyer education course, which provides guidance on managing finances and understanding the homeownership process.

9. Native American Direct Loan (NADL) Program

The Native American Direct Loan (NADL) program, administered by the Department of Veterans Affairs (VA), helps eligible Native American veterans and their families purchase, build, or improve homes on Federal Trust Land. The NADL program offers several benefits, including no down payment, no private mortgage insurance (PMI), and low fixed interest rates, making it a valuable option for eligible low-income borrowers.

Key Features of the NADL Program

• No Down Payment: Borrowers can finance 100% of the home’s purchase price with no down payment required.
• No PMI Requirement: Unlike conventional loans, the NADL program does not require private mortgage insurance, reducing monthly costs.
• Low Fixed Interest Rates: The VA sets competitive fixed interest rates for NADL loans, helping borrowers save over the life of the loan.
• Flexible Use of Funds: Loans can be used to purchase, build, improve, or refinance a home located on Federal Trust Land.

Eligibility Requirements for the NADL Program

To qualify for the NADL program, borrowers must meet the following criteria:

• Veteran Status: Applicants must be Native American veterans or veterans married to a Native American. They must also meet the VA’s military service requirements for VA loan eligibility.
• Certificate of Eligibility (COE): Borrowers must obtain a NADL-specific Certificate of Eligibility from the VA. This document verifies that the veteran qualifies for the program.
• Tribal Agreement: The veteran’s tribal government must have a Memorandum of Understanding (MOU) with the VA to participate in the NADL program. This agreement ensures that the tribal government supports and participates in the program.
• Federal Trust Land Requirement: The home must be located on Federal Trust Land or land designated as tribal trust land.

10. Fannie Mae’s Community Seconds Program

Fannie Mae’s Community Seconds program is an innovative loan option that helps low- and moderate-income borrowers overcome the financial barriers to homeownership. This program allows borrowers to combine a primary mortgage with a second loan or grant from an approved source to cover down payments, closing costs, or even home renovations. It’s a flexible and affordable solution for buyers who need extra financial support.

Key Features of the Community Seconds Program

• Stackable Financing: Borrowers can combine a second loan or grant with their primary mortgage, reducing upfront out-of-pocket costs.
• No Immediate Repayment for Some Loans: Many second loans under this program are deferred or forgivable, meaning repayment isn’t required until the home is sold, refinanced, or the loan reaches maturity.
• Flexible Loan Amounts: The combined amount of the primary mortgage and the Community Seconds loan can reach up to 105% of the home’s value, helping cover additional costs.
• Diverse Funding Sources: Second loans can be provided by local or state housing agencies, nonprofits, employers, or other approved organizations.

Eligibility Requirements for Community Seconds

To qualify for the Community Seconds program, borrowers must meet specific criteria:

• Primary Mortgage Requirements: Borrowers must qualify for a Fannie Mae-approved mortgage, such as the HomeReady program, with a minimum credit score of 620.
• Income Limits: Household income must typically fall within 80% of the area median income (AMI), though limits can vary by program or funding source.
• Primary Residence: The property must serve as the borrower’s primary residence. Second homes and investment properties are not eligible.
• Property Types: Eligible properties include single-family homes, condos, co-ops, and manufactured homes (if the primary mortgage allows).
• Source Approval: The second loan or grant must come from an approved funding source, such as a state housing finance agency, nonprofit, or employer.

11 Tips for Buying a House with Low Income

Here are ten viable strategies for buying a home when you’re working with a lower income.

1. Partner with a Knowledgeable Real Estate Agent

A knowledgeable real estate agent can help steer you through this process, simplifying complexities and identifying opportunities you might overlook. They can guide you towards homes within your budget, help you understand various loan programs and down payment assistance options, and even negotiate better loan terms. Their expertise and guidance can ultimately lead you to the homeownership path best suited for your circumstances.

2. Embrace Low- or No-Down-Payment Loans

There are loan options designed with you in mind. Look into conforming loans that require a minimal 3% down payment or explore government-backed loans like FHA, VA, or USDA loans. The latter are especially tailored for low- to moderate-income borrowers and offer attractive terms such as low down payments and flexible credit requirements.

3. Buy a Less Expensive Home

One of the most straightforward methods to make homeownership more attainable is to lower your price range. Consider purchasing a smaller house, an older house, or a house in a less expensive neighborhood. These options can substantially reduce the cost of your mortgage and make your dream of homeownership more feasible.

4. Take advantage of Down Payment Assistance Programs

Did you know that every state offers grant and loan programs to assist lower-income borrowers with their down payment? These programs often go unnoticed but could provide the essential help you need to make your dream home a reality. This cash infusion can significantly lower the initial costs and make the process more manageable.

5. Consider a Co-Signer

Enlisting the help of a co-signer — perhaps a family member with strong credit and income — can significantly increase your chances of loan approval. By co-signing, they’re pledging to back your mortgage loan if you can’t make the monthly payments, thereby reducing the risk for the lender.

6. Strengthen Your Credit

Your credit score is a key influencer when it comes to qualifying for loans and securing lower mortgage rates. It’s worth taking time to review your credit report and rectify any discrepancies that may be impacting your score negatively. As well, making timely payments, reducing debts, and avoiding new credit obligations can help boost your creditworthiness.

7. Save for a Larger Down Payment

While this might take time, saving for a larger down payment can help in two ways: it can lower your monthly mortgage payment and make you a more attractive candidate to lenders.

8. Decrease Your Debt-to-Income Ratio

Your debt-to-income ratio (DTI) is a significant factor that lenders consider. It’s the percentage of your monthly income that goes toward paying off debts. Lowering your DTI—by either increasing your income or reducing your debt—can improve your chances of qualifying for a low-income mortgage.

9. Seek a Cash Gift

If you’re fortunate to have a generous friend or family member, consider asking for a monetary gift. The funds can be used to offset your down payment or closing costs. Keep in mind, however, there might be specific requirements or limitations when using gifted money in this manner, so it’s important to understand the rules set by your lender or loan program.

10. Apply for a Housing Voucher

The Department of Housing and Urban Development (HUD) offers a Housing Choice Voucher Program, commonly known as Section 8. If you’re eligible, this program can assist with monthly homeownership expenses, making it a valuable resource for low-income home buyers.

11. Find a Rent-to-Own Option

Opting for a rent-to-own agreement can be a smart path to homeownership for low-income buyers. In these deals, you lease a home with an option to buy it before the lease ends. A portion of your rent payment goes towards the home’s purchase price, allowing you to build equity over time.

The purchase price is often set at the lease’s start, which can be beneficial if home values rise. However, these contracts can be complex, so understanding all terms, like the final purchase price and amount of rent going towards it, is crucial.

Bottom Line

It can be challenging to buy a home as a low-income borrower, but it’s not impossible. The previous five programs make it possible for low-income borrowers to purchase the home that’s right for them.

Even if you don’t think you’ll qualify, there is no harm in looking into each of these options to see if you can get approved for a mortgage.

Make sure you consider all of your options and look for the lender that offers you the best rates. If you’re not sure where to start, you can try contacting a qualified loan officer. They can evaluate your financial situation and help you determine which program is the best fit for you.