If You Are Receiving Disability Benefits, You Can Buy a Home

In qualifying potential mortgage holders, lending institutions look for income that is stable, reliable, and expected to continue for the foreseeable future. Do disability benefits count as steady income?

Social Security Disability Insurance (SSDI), Supplemental Security Income (SSI), VA disability benefits, and long-term disability income from an employer or insurer are generally considered reliable sources of income, and lenders will accept them as proof of eligibility for a home loan. All the major home loan programs, including FHA, VA and USDA, accept these types of income when you are qualifying for a mortgage. So, yes, you can buy a home on disability income.

Regardless of who is applying for a mortgage—a person with a disability or not—lenders want to be sure that the borrower can do two things: afford the monthly payments now and continue affording the monthly payments for the long term.

If your income is sufficient and you’ll continue receiving it for at least three years, and you meet the lender’s other requirements, you should be able to qualify for a mortgage and purchase a home.

Lenders cannot refuse to consider disability benefits income. They cannot treat you differently because of your disability or your disability income. Lenders can’t hold you to stricter documentation requirements than they do other applicants. Lenders can’t ask you about the nature of your disability or request a letter from your physician.

However, you will need to provide proper documentation of your income and ensure that you meet the lender’s credit standards.

You’ll need to provide some verification—such as a Social Security Administration (SSA) award letter, a VA award letter, an SSA form 1099, or other documentation—to show proof of your disability income, and that your benefits aren’t set to expire within the next three years.

If the disability income you receive isn’t taxed, your lender may “gross it up,” meaning they will increase your reported income by a certain percentage (typically 25%) to account for the fact that you get to keep the full amount. You may also need to provide other documentation, like W-2s, tax returns or bank statements

There are several types of mortgages you can apply for if you’re on disability. These include:

FHA loans

A Federal Housing Administration (FHA) loan is a mortgage that is insured by the U.S. government and issued by a private lender, such as a bank. FHA loans are designed to help people with lower credit scores or less money for a down payment become homeowners.

An FHA loan is often the most affordable mortgage option for first-time homebuyers. Typically, an FHA loan has a very low down payment—as low as 3.5% of the purchase price and may be easier to qualify for than a conventional mortgage.

VA loans

If you or your spouse served in the military, you may qualify for A VA loan that’s partially guaranteed by the Department of Veterans Affairs (VA) and issued by private lenders.

VA loans can offer better terms than traditional loans, including: no down payment for nearly 90% of VA-backed loans, no private mortgage insurance, and a lower interest rate.

USDA loans

USDA home loans are mortgages that help low-to-moderate income homebuyers purchase homes in rural or suburban areas. The U.S. Department of Agriculture guarantees these loans, which are issued by participating lenders. Like VA loans, USDA loans don’t require a down payment.

Fannie Mae HomeReady and Freddie Mac Home Possible

Fannie Mae HomeReady and Freddie Mac Home Possible are mortgage programs for low-income home buyers. Fannie Mae and Freddie Mac are government-sponsored enterprises that help make affordable housing and mortgage loans available in the United States. Both programs offer low down payments and flexible credit terms. Both programs offer a minimum down payment of 3%, but your income must be at or below 80% of the area median income. You must have a minimum credit score of 620 for HomeReady and 660 for Home Possible.

The exact eligibility requirements for each of these loan options will depend on the loan program you choose.

For some individuals with disabilities, the home they want to buy may need repairs or updates for accessibility. Some loan programs, such as FHA loans, allow you to finance the purchase price of the home and the repairs and updates with a single loan.