March 31, 2002 [Updated July 31, 2012]
Financing a home purchase is often the greatest obstacle preventing people with disabilities from home ownership. People with disabilities face unique needs and issues such as poor or no credit histories and fixed or limited income which restricts their ability to save money for downpayments, closing costs, costs of maintaining a home or making access modifications or repairs.
There is much to consider when pursuing homeownership. New Horizons Un-Limited hopes that the options presented in this guide will educate you on the home buying process and help make homeownership a reality for more individuals with disabilities.
The purpose of this guide is to provide information for people with disabilities who are 18 to 59 years of age, and does not necessarily offer information specifically for the elderly.
New Horizons Un-Limited assumes no responsibility in guaranteeing the services, programs or conditions as described. If you are interested in a resource listed below, call or contact the resource to verify the current situation. Evaluate information and make your own decisions when using this guide.
Following is a quick outline of this guide, click on the link to go directly to the section of your choice.
Chapter 2 describes assembling a planning team to help in every phase of the home-buying process and to provide ongoing support to the new homeowner. They provide a detailed example of one successful homebuyer's experiences using this approach.
Is Your Credit In Order?While there are flexible mortgage programs available to homebuyers with disabilities, your credit score will still be considered.
Your first step should be to request your credit report from each of the three consumer credit reporting companies - Equifax, Experian and TransUnion.
Under the Fair and Accurate Credit Transactions Act you are entitiled to receive one free copy of your credit report each year. To simplify the process of obtaining your report from each company, Equifax, Experian and TransUnion have created a website, AnnualCreditReport.com, through which you can securly request and view your credit report online.
If you prefer to contact each credit reporting company separately, you may call:Equifax, 1-800-685-1111 Experian, 1-888-397-3742 TransUnion, 1-877-322-8228
Your credit score will range from 300 to 850. Typically, a person with a credit score of 620 or lower is considered a credit risk.
If you have had past, serious credit problems you must take steps to repair your credit score before applying for a mortgage. While increasing your credit score will take time and require an ongoing effort from you, you can see quick improvement by paying down your past debt and by successfully disputing negative information on your credit report.
To learn more about the steps you can take to improve your credit score, visit the Federal Trade Commission's Building a Better Credit Report.Building Nontraditional Credit
One issue that may arise is that you have not established a traditional credit record through the payment of credit cards or traditional (bank-provided) loans.The Federal Housing Administration (FHA) has long permitted mortgage lenders to establish a borrower's credit history through nontraditional means, including the compilation of performance on rental payments, utility bills, telephone and cellular phone services, cable television service, payments to local stores, etc. Such records must typically track payments for no less than 12-months and must be supplemented by at least three credit references/ payment verifications from your landlord, utility company, cable company, home telephone provider, etc.
To learn more about how nontraditional credit is treated by lenders, download the Nontraditional Credit Verification and Evaluation Letter issued by the Federal Housing Administration.
There are both one-time (upfront) and ongoing expenses that you must consider when purchasing a home. You should consider creating a budget that details both your monthly income as well as current and future expenses. You can download a Personal Budget Worksheet template from Microsoft Office Online.Upfront Expenses
Additional information about the Fannie Mae Community Home Choice Program, is available via:
An offshoot of the Section 8 Housing Choice Voucher Program, the Home Ownership Voucher Program allows you to use what was your rental voucher to either receive monthly assistance towards your mortgage payment or a single grant to be used towards your downpayment.
This and other HUD programs are administered through Public Housing Authorities (PHA). As this program is not mandated, not all Public Housing Authorities participate in the program. Contact your local PHA to learn if they offer Home Ownership Vouchers.
Following are a few more details of the program.
Contact your local Public Housing Authorities (PHA) to learn more.
Community Reinvestment Act
Municipalities can offer federal grant monies for low income home ownership. Contact your city hall.
Neighborhood Stabalization Program Grants
The Neighborhood Stabilization Program (NSP) was established for the purpose of stabilizing communities that have suffered from foreclosures and abandonment. NSP funds can be used to help homebuyers purchase homes, but they must contact an NSP grantee for application details. NSP operates on a national scale, but participation requirements may differ from one state or city to another. For information on how you may purchase a home with NSP assistance, please contact an NSP grantee in your area. To view grantees by state, see NSP Grantee Contacts page for details. If you would like additional information on the program please use this form to contact a HUD NSP Representative.
Housing Counseling AgenciesThe US Department of Housing and Urban Development (HUD) sponsors housing counseling agencies throughout the country that can provide advice on buying a home as well as information on local financial assistance programs. Visit the HUD website to locate a Local Housing Counseling Agency. Housing Finance Agencies (HFAs) HFAs are state-chartered authorities established to help meet the affordable housing needs of the residents of their states. While programs vary greatly from one HFA to the next, many offer a variety of home buyer programs, which can range from forgivable loans for downpayments to flexible fixed-rate mortgages. Visit the National Council of State Housing Agencies to locate your Local Housing Finance Agency. Individual Development Accounts Individual Development Accounts (or IDAs) are special matched savings accounts designed to help low-income individuals and families establish a pattern of regular savings and, ultimately, purchase a productive asset. Savings and match money may be used toward the purchase of a home. IDAs are unique in that every dollar an individual deposits into an IDA is matched. One requirement of the IDA is that deposits must be made from earned income. In many cases, disability and social security payments are considered income and can be used to build up an IDA. SSI and SSDI beneficiaries must be very careful when utilizing IDAs to save, as their savings could disqualify them from receiving future benefits. You will want to make certain that your IDA is funded by Temporary Aid to Needy Families (TANF) or the Assets for Independence Act (AFIA), as assets saved in these IDAs are not counted. It is very important that you make your IDA provider aware that you are receiving federal benefits. To learn more about how an IDA could impact your benefits, read the 2002 Federal IDA Briefing Book: How IDAs Affect Eligibility for Federal Programs. To learn more about IDAs, visit CFED (Corporation for Enterprise Development) online or contact them via e-mail at firstname.lastname@example.org or via phone at (202) 408-9788.
To locate an IDA program in your area, visit the CFED IDA Directory online.
Via the Low-Income Energy Assistance Program (LIHEAP), low-income homeowners can receive help in paying their winter heating or summer cooling bills. Eligibility is limited to low-income households that show an "energy burden." Weatherization assistance (i.e. installation of energy-efficient windows, weather stripping, insulation, etc.) is also available. To learn more, visit the LIHEAP national directory or call the National Energy Assistance Referral (NEAR) project toll-free at 1-866-674-6327.
The lender is going to require some of the following insurance when you purchase a home.
If the lender requires the insurance, they will probably add this to your
monthly mortgage payment amount and hold the money in an escrow account. In the case of homeowner's insurance, you are responsible for
acquiring the policy, reviewing the policy for adequate coverage and paying for the policy,
although the lender may require you to pay the actual yearly payment from your escrow account.
Homeowner's insurance combines protection against damage to your property, house and its belongings and protects against claims of negligence or inappropriate action concerning the property that would result in someone else's injury or damage to someone else's property. The lender may ask for proof of this insurance or will collect from you during the year in your monthly mortgage payment and will put a portion of each payment for this insurance in an escrow account. This insurance is usually required by the lender to protect their investment, however, acquiring the insurance, the terms of the insurance, reviewing the terms for adequate coverage and paying for the insurance will be your responsibility.
This insurance may not be necessary and does not come standard on a homeowner's insurance policy. This insurance protects the homeowner against loss from flood, thawing and hurricanes. If the house is located on a flood plain, the lender will require this insurance before approving a loan. The Federal Emergency Management Agency (FEMA) defines flood zones on their maps.
This insurance protects the lender against loss if the borrower were unable to make their monthly payment and defaults completely on their mortgage loan. If you as borrower can only make less than 15-20% downpayment for the mortgage loan, the lender my require this insurance. The 203(k) FHA mortgage insurance program helps the homebuyer to purchase and rehabilitate a house with a single mortgage loan.
Mortgage life, disability or unemployment insurance
This insurance is term life insurance that diminishes over time as you pay off your mortgage. This insurance will pay off the remainder of the mortgage if you die and pay a certain number of monthly payments if you become disabled or unemployed. If you are disabled or unemployed prior to seeking mortgage pre-approval, this insurance would not be reasonable to purchase.
This insurance protects the lender against any claims that may come up about who legally owns the property. This insurance is also available for the homebuyer. A title search will check the public record to be certain the seller is the legal owner of the property and discover any liens or claims against the property. Ask your lender if this insurance will be necessary.
Personal Property Insurance
Personal property is usually covered from theft on your homeowner's insurance. Check the conditions under your homeowner's policy for coverage of theft of household goods. If you wish to cover your household goods during moving or storing in a self-storage facility, you may want to check out this insurance.
Other Sources of Information and Support
The Center for Housing and New Community Economics (formerly the National Home of Your Own Alliance) has written A Home of Your Own Guide which features a comprehensive look at the home buying process for people with disabilities.
National Fair Housing Advocate
U.S. Department of Housing and Urban Development (HUD)
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