How to Buy a Home With a Low Income
- 1). Get your credit in order. You must have good credit to make any major purchase that you're not paying for fully . Get a copy of your credit report (see Resources) and see if you have many late payments or charge-offs or have a lot of debt to repay. If you do have these problems, improve your credit by paying down your credit cards, paying bills on time and making sure you pay everyone you owe.
- 2). Get your spending in order. List your bills and your income. Make a financial plan that shows how your current reliable income can cover all of your bills plus your proposed mortgage, with money left over. Banks don't want a person's mortgage to be more than 25 percent to 30 percent of their income. A bank's rules might vary a little, but stick to this guideline and you will be safe.
- 3). Save money for a down payment. You may not be able to save a lot but save as much as you can. Aim to have at least 5 percent of the cost of the house for a down payment. A down payment helps the bank to see that you have resources, know how to save and helps cover the costs of lending you money if you don't pay back the loan. Having a down payment is an important selling point to show the bank you are trustworthy. If you can save up more the 5 percent, so much the better.
- 4). Call your state's office of Housing and Urban Development or similar office (see Resources) to ask about any programs for first time home buyers or home buyers with low income. There may be programs where you can get low interest loans or qualify for grants to help with the down payment.
- 5). Go to a bank to see if you can get pre-approved for a mortgage before you look for a house. If you qualify, this will make looking for a house simpler and more targeted because the bank will tell you what price range you are pre-approved to buy. Even if you do not get approved you will have an idea of what the bank is looking for in order for you to buy a house.
- 6). Look for a house you can afford. Consider what you make a month and how much you can afford to pay for a mortgage. You can use amortization calculators (see Resources) to help you find out what your payment would be under different interest rates and mortgage amounts. You shouldn't buy a house that costs more than three times you're annual salary Look for a house you can afford. Consider what you make a month and how much you can afford to pay for a mortgage. You can use amortization calculators (see Resources) to help you find out what your payment would be under different rates and mortgage amounts..You shouldn't buy a house that costs more than three times you're annual salary. You might find a lender that would let you do this but it is not financially smart to owe so much on a mortgage that you have trouble paying your bills or saving for an emergency.
