If you live with a disability, there’s a major benefit to having your own house. You can set it up in a way that works for your unique needs, minimizing the impact of any limitations you may have, physical or otherwise. It can be your sanctuary from a world that often presents hurdles. While there are no specific home loans for the disabled, you do deserve to have concerns addressed.
Are There Home Loans For People With Disabilities?
Mortgages catering to people who have disabilities don’t exist. However, you can avail yourself of the same options to buy a home that are available for those who have ordinary physical function, are neurodivergent or have normal hearing or vision. And you have rights designed to prevent discrimination on the basis of your disability.
How The Government Defines Disability
Let’s start from the basis that disability is hard for anyone to define because it manifests itself in so many different forms. Sometimes it can be obvious. The author of this article uses a power wheelchair and has fairly severe physical limitations. But other impairments, like ADHD or anxiety, aren’t readily apparent when first interacting with someone.
The federal government likewise has trouble settling on one definition and has three that are used depending on the context. Each touches on income or the employment used to earn the income which you can, in turn, use to qualify for a mortgage.
If you have a severe enough disability that you cannot work, you may qualify for Social Security disability benefits. To qualify as disabled for these purposes, the disability or disabilities must last at least 12 months or eventually result in your passing and prevent your working at a level considered “substantial gainful activity.”
Before we go any further, it should be noted that no mortgage company should care whether you have a job. You can qualify as long as you have any legal source of regular income. For most people that comes from employment, but it can also be derived from disability benefits or special needs trust payments, among many other sources.
The next definitions involve your rights in employment. While not directly related to qualifying for a mortgage, the income from your job pays the bills.
When discussing nondiscrimination laws such as the Americans with Disabilities Act (ADA) disability is defined as one of the following:
- A physical or mental impairment that limits at least one “major life activity”
- Having a diagnosis or other record of the impairment
- Being generally regarded as having the impairment
Finally, vocational rehabilitation or other work placement services for the disabled offered by states require that the person has a “substantial impediment” to employment.
It should be noted that because these are issues of civil-rights and employment law, some of the terms used even in the definitions themselves have their own meanings that have been subject to court decisions.
Much of what we talk about in this post regarding rights and assistance available for those with disabilities turns on questions of legality. Although we’ve tried to synthesize much of the information you need to know, nothing in this post is intended to be taken as legal or financial advice. If you have questions regarding programs or rights, you should reach out to the agency in charge of their administration and/or speak with a lawyer.
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Home Loans For Disabled Borrowers
Before you start looking at different homes, you need to understand the home loan options that are available to help you. While you’re free to apply for any home buying program that may fit your needs, there are specific programs in place that can help buyers get into homes more easily.
Conventional Loans
here are some of the major requirements associated with conventional loans:
- 620 qualifying FICO® Score
- For the best chance of qualifying, DTI of 43% or less
- Down payment from 3% – 5% for a primary residence
Most conventional loans meet the requirements of Fannie Mae and Freddie Mac are two of the biggest backers of conventional loans in the U.S. They buy loans that conform to their standards and then package them into mortgage-backed securities for their mortgage investors. These sales in the bond market determine what interest rate you receive.
More importantly, Fannie Mae and Freddie Mac both have a couple of loan options for lower income borrowers who can afford a home, but don’t have a ton for a down payment, HomeReady® and Home Possible®.
These programs allow both first-time and repeat home buyers to purchase a home with as little as 3% down as long as they make below 80% of the area median income where they’re looking to buy. The closing costs may also be slightly less expensive because there are no pricing adjustments in the way there would be with standard conventional loans.
Before we move on, it’s also worth noting that first-time home buyers can qualify with a 3% down payment regardless of their level of income.
Finally, there’s an option that doesn’t involve you getting your own mortgage, but merits mentioning. Both Fannie Mae and Freddie Mac allow people to purchase a home as a primary residence for their parents or disabled children to live in if these individuals cannot work and don’t have income for themselves.
The primary residence piece is important because you’re getting a lower interest rate than getting this as an investment property. This is one of the rare instances in which you can claim something as your primary residence without physically occupying the property.
VA Loans
A VA loan is for eligible veterans, active-duty service members, reservists, National Guard personnel and qualifying surviving spouses. Unlike most loans, this one doesn’t require a down payment. The VA also doesn’t have a minimum credit score, but you must meet lender requirements. Likewise, the maximum DTI is based on lender policy and individual circumstances.
Beyond the normal benefits, there’s one point of special relevance to this audience. If you qualify for VA disability benefits based on a service-connected disability, you don’t have to pay the VA funding fee. This saves you from paying anywhere between 0.5% – 3.3% of the loan amount depending on the down payment or equity and how many times you’ve had a VA loan.
To qualify, you’ll need to do all of the following:
- Satisfy the minimum service requirement
- Plan on using the home as your primary residence
- Choose a home that is in good condition
USDA Loans
The U.S. Department of Agriculture (USDA) offers a home loan program that could be a good opportunity for adults with disabilities. The primary benefit of a USDA loan is that no down payment is necessary.
The Single Family Housing Guaranteed Loan Program is designed for one-unit homes. Through this program, moderate-income applicants who live in eligible rural areas can qualify for a home loan. To qualify, you’ll need to satisfy the following conditions:
- Your income must meet the eligibility requirements, meaning you make no more than 115% of the median income where you’re looking to buy.
- You’ll have to choose a property that’s in a qualified rural area.
- Your mortgage payment can’t exceed 29% of your qualifying income. When all of your other obligations are added in, you can’t be putting more than 41% of your income toward debt payments.
- You need to use the property as your primary residence.
If you’re a low- or very-low-income borrower who can’t find safe, decent and sanitary housing otherwise, you may qualify for a direct loan from the USDA. These have 5.125% interest rates as of January 1, 2024 and may be further lowered with payment assistance. The term is either 33 or 38 years, depending upon income level.
FHA Loans
An FHA loan is often presented as a great option for anyone with a lower credit score. Since these loans are backed and insured by the Federal Housing Administration, borrowers can access lower down payment options.
To qualify for this type of loan, you’ll need to have the following:
- A credit score of at least 500
- Required DTI can vary based on your individual situation and lender requirements
- A down payment of at least 3.5% with a qualifying FICO® Score of 580 or better (10% for credit scores of 500 – 579)
The FHA loan program allows home buyers with less-than-ideal credit to qualify for financing. If you’re worried about your credit score and don’t think you’ll qualify for a different type of home loan, an FHA loan may be the right choice.
Tips For Getting A Home Loan If You Have A Disability
The home buying process can be a challenge for anyone whether you’re looking into disability home loans and grants or are buying a house with cash. However, there are many ways to create a smooth home buying experience.
Know Your Rights
As a person with a disability, it’s important to understand your legal protections when shopping for a home. You can explore your protection through the help of the National Disability Rights Network and the American Bar Association.
Unfortunately, it’s possible that you will run into a violation of your rights along the way. If you need to report a violation, then contact the appropriate agency. For violations of the Equal Credit Opportunity Act (ECOA), contact the Consumer Financial Protection Bureau or (855) 411-2372. For violations of the FHA lender process, contact HUD Complaints or (800) 669-9777.
Fair Housing Act
The Fair Housing Act was designed to protect buyers from discrimination based on race, color, disability, religion, sex, familial status or national origin. Violations of the law can be enforced with significant penalties for those who trespass against the rights of a protected class. The Fair Housing Act also applies to mortgage lenders in home financing.
If you are the victim of housing discrimination, then you can file a complaint against the offender with HUD.
Americans With Disabilities Act
The Americans with Disabilities Act (ADA) provides wide protections for people with disabilities. Through the act, you have the right to “reasonable accommodations” to your home. With that, the reasonable accommodations of your disability may take precedence over the rules set forth by a homeowners association (HOA). But it can get a little complicated.
HOAs are typically considered private associations not subject to the ADA. However, the ADA can begin to apply if memberships are sold to the public to use HOA facilities. The same is true if on a regular basis, but facilities are used by schools, church groups or clubs. They apply if there’s a rental office that gets regular visits from the public.
Finally, because the ADA applies to commercial facilities, you may have a good case for an ADA exception to HOA rules if you live in a mixed-use development with both commercial and residential space.
Understand The Full Cost of Independent Housing
There are certain costs of housing that are highlighted in many of the articles. For instance, you’ll need at least 3% of the purchase price to put down in many cases. Add to that an additional 3% – 6% of the home price in closing costs. However, for many in the disabled community, the cost is potentially much higher for reasons beyond the mortgage.
As mentioned earlier, disability could mean many things, and what is listed below may be different than what applies to you. Consider these costs as well:
- Modifying the home: Most homes aren’t going to be turnkey operations for disabled homeowners to move into right away. For example, you may need a ramp. Other modifications could include everything from wider doorways and grab bars to ceiling and stair lifts. If you have vision impairments, you want to lay out your home in a way that makes navigation as safe as possible. Those with hearing impairment may want lights that flash when an alarm goes off. You’ll need to budget for this.
- Cost of care: If you’ve been previously living with relatives who have been helping with certain activities of daily living that you struggle with, you’ll need to figure out who can provide that care when you move out. If you’re eligible for Medicaid or Medicare, in-home care is often covered. On a traditional private insurance plan, such care may be limited to a certain number of visits per year and may require a recent hospital stay. If you have things you need help with every day, you may need to find an alternative.
- Benefit implications: Saving for and making the payments on a home requires a fair amount of resources. However, eligibility for things like Supplemental Security Income (SSI) and Medicaid have strict resource limits, so you may need to do some shrewd financial planning. One solution may be an ABLE account, which allows you to contribute up to $18,000 each year tax-free that can be used toward qualifying disability expenses. For the purpose of determining resources in means-tested programs, the first $100,000 in the account doesn’t count toward an individual’s limit. One of the qualifying expenses is housing. There may be other ways of accomplishing similar financial flexibility without endangering your eligibility for services, but we recommend consulting a financial advisor specializing in special-needs planning.
Research Grants
Beyond home loans for adults with disabilities, there are several grants available that could ease the financial burden of buying a home. Here are some of the most popular grants to start your search:
- VA housing grants: The VA has a couple of grants for disabled veterans looking to make adaptations in a home of their own. Specially Adapted Housing grants involve bigger adaptations like remodeling your entire home. Meanwhile, Special Home Adaptation grants are for smaller modifications, but may still be helpful in allowing you to achieve the independence you desire. In either case, you will need to have a qualifying service-connected disability when making your application. There are a limited number of grants made each year.
- USDA housing grants: If you qualify as a very-low-income homeowner, age 62 or older in an eligible rural area, the USDA has grants that can be used to remove health and safety hazards. This could allow you to age in place.
- Local and state governments: Local and state governments may have their own programs for the purpose of assisting potential homeowners who have disabilities. Check for resources in your area.
- Nonprofits: Nonprofits may offer grants of their own or be able to help with the assistance in home modification.
Work With A Real Estate Agent
If you’re trying to buy a home and have a disability, the best thing you can do is partner with an experienced real estate agent to help you navigate the home buying process. They’ll be able to help you find a home that fits your needs and may even have contractors they can recommend to make any necessary modifications to the property once you buy it.
FAQ
The following are a few questions you may still have before taking the step of getting a home loan of your own.
The Bottom Line
While there are no loan programs specifically targeting homeownership for those with disabilities, you can apply for the same loan options as anyone else. It’s also illegal for a lender to discriminate against you on the basis of your disability.
One of the most important things is to make sure that in addition to affording the mortgage payment, you’ve budgeted for the full costs of moving out on your own including home modifications and any potential care. You may be eligible for certain grants. A real estate agent can help you find a house that’s going to work for you.
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Kevin Graham
Kevin Graham is a Senior Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a bachelor's degree in journalism from Oakland University.
