Mortgage & Refinance Guide for People with Disabilities

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Overview

There are always things to consider for first time home buyers or people looking to refinance their home, and a disability can make the process even more complex, but that is no reason to put off your dreams. In this article, we will discuss your rights, the home purchasing process, and programs that are specifically available to seniors, disabled individuals, and military veterans.

 

Historical Perspective

In 1968, President Lyndon Johnson signed the Civil Rights Act of 1968, which includes a subsection commonly known as the Fair Housing Act. This document prohibited discrimination when it came to the sale, renting and financing of housing. It would later be amended to protect handicap and family status in addition to the already included race, religion, national origin, and gender.

  • To learning more about the Fair Housing Act, visit NOLO’s Fair Housing Act and Amendments
  • If you are interested in reading about further legislation, The Americans with Disabilities Act, that has helped to improve the lives of individuals with disabilities, you can visit the ADA’s Guide to Disability Rights Laws.

 

Your Rights

Thanks to the Fair Housing Act and the Americans with Disabilities Act, the law is on your side. If you can afford to pay a mortgage, regardless of if the income comes from work or disability payments, banks and lenders may not reject your application based on disability. They can only consider the financial aspects of the application such as if your income is steady, if you have enough to cover the mortgage size that you are interested in, and if you have a good history when it comes to paying bills on time.

To learn more about your rights, and what to do if you feel that they are being violated, visit the following websites:

 

State Housing Resources

 

The Pros and Cons of a Mortgage and Home Ownership

Home ownership is a dream for many people, and why not? It is hard to see your monthly rent doing nothing but paying someone else’s bills rather than being an investment in your own assets. However, along with the benefits come risks.

Here are some pros and cons to consider before making the final leap:

Pros:

  • Financial benefits: You will have an asset that can be used as a tax deduction as well as opening up more possibilities for loans and second mortgages.
  • Modifications: There will be less negotiating required to get the home modified for your own unique needs.
  • Long-term stability: Owning your own home means that you are no longer at the mercy of a property owner who may decide they need the home back at some point.

Cons:

  • Home maintenance: If you live in a rental apartment, you may not have to deal with shoveling snow, raking leaves, and dealing with (and paying for) home repairs. However, if it is your house you are more likely to be solely responsible for all of the above.
  • Expensive mortgage payments and other associated costs: Property tax, home insurance, and a mortgage can quickly add up to unaffordable levels.

To learn more about the benefits and risks of homeownership, visit:

 

The Home Purchasing Process

Buying a home can be a long and arduous step-by-step process. It requires the three Ps: planning, patience, and perseverance. Here is what you can expect to do to complete the process:

  1. Research: See what is available in the local market, look into funding options, and begin thinking about your requirements versus areas in which you are willing to make concessions.
  2. Calculate: Figure out how big of a mortgage you can reasonably afford based on your income and expenses. Discover offers a calculator at Affordability Calculator.
  3. Prequalify: Bring your financial documents to your lender and have them determine what price range you can afford for a new home with the mortgage options available to you.
  4. Look at homes: Finally! Look at homes in your chosen area. A realtor can significantly help with this process.
  5. Home inspection: Once you have found the perfect house, have it inspected by a qualified professional to determine if there are any significant problems with the property that need to be dealt with before the sale.
  6. Appraisal: Have the home appraised to determine its current value.
  7. Select a loan: Work with your lender to select the home loan that fits with your finances, your situation, and the home that you are looking to purchase.
  8. Legal: Have a title company confirm that the home is free and clear of taxes, leans, disputes, and other potential problems.
  9. Closing day: Sign the final papers and transfer payment. Congrats!

To learn more about the home purchasing process, visit:

 

Types of Home Loans Available

There are multiple types of home loans to choose. Chances are that one is perfect for your unique situation. Don’t be afraid to explore your options!

Most popular

  • Interest-Only Mortgages: These mortgages help to make home ownership more attainable at first by allowing the new homeowner to pay only on the interest for the first few years. To learn more visit FDIC’s Interest-Only Mortgage Payments and Payment-Option ARMs.
  • FHA Loans: These are insured by the Federal Housing Administration, which may help the buyer to access mortgages by lowering the risk for lenders. You can find out more about them through your local housing office or lender. To learn more, you can visit the University of Nebraska-Lincoln HUD Home Buying Guide.

Hybrid

  • Mortgage Buydowns: This mortgage product can potentially lower interest rates without requiring more cash at closing. To learn more, visit Freddie Mac’s Financed Permanent Buydown Mortgages.
  • Adjustable-Rate Mortgages: An ARM is a loan with a changing interest rate. They may be more affordable in the beginning; however, they carry the risk of an increased payment later on. To learn more, visit ConsumerFinance.gov for their Consumer Handbook on Adjustable-Rate Mortgages
  • Option ARM Mortgages: This is the same as an ARM (above), but it comes with an interest rate that adjusts on a monthly basis and a payment that changes annually. To learn more, visit the Columbus Metro Credit Union for their brochure, Interest-Only Mortgage Payments and Payment-Option ARMs — Are They for You?
  • Combo Loans: This combines a first and second mortgage in order to avoid paying a large cash down payment at closing. To read more about it, visit the Home Loan Help Center to read their page on The Combo Loan.

Specialty

  • Equity Mortgages: These are alternative mortgages based specifically on the equity of the purchased property.
  • Bridge Loans: This is a short-term loan taken out against the buyer’s current property in order to finance the purchase of a new one.
  • Streamlined-K Loans: This is an FHA loan specifically for homes that will need repairs. It helps the buyer to finance both the property and the repairs.

To learn more about specialty mortgage options, visit SunTrust’s page on Mortgage Types.

 

Programs for Disabled Individuals

  • Fannie Mae Community HomeChoice with PHFA Access Modification: This assistance can help with necessary modifications to a home to make it accessible. For more information, visit Fannie Mae.
  • Section 8 Home Ownership Voucher Program: This HUD-provided voucher program offers income based mortgage payments. See your local or state housing assistance office for details on the program in your area.
  • Habitat for Humanity: This organization offers new and affordable housing for potential homeowners who may not qualify for traditional mortgages. To learn more about them, you can access the Habitat for Humanity website.

Opportunities for Veterans

VA loans, including VA Streamline refinance loans, are the primary lending option for veterans. This military loan guaranty program helps soldiers to attain homeownership through 0
% down, no PMI loans with competitive interest rates and easier qualifying.

In addition, there is a Specially Adapted Housing (SAH) Grant offered for disabled veterans who need to make home modifications.

To learn more about your options, visit the US Department of Veterans Affairs Home Loans page.

Opportunities for Senior Citizens

Senior citizens have traditional, hybrid, and specialty loan options available as well a reverse mortgages and HARP.

Reverse Mortgages: These allow homeowners who are 62 years or older to stop paying monthly mortgage payments by using the equity already built up in the home. The option can be a lifesaver for seniors with limited monthly funds. For more information, visit the University of Illinois Extension Advantages and Disadvantages of Reverse Mortgages.

Home Affordable Refinancing Program (HARP): This government program can help homeowners with underwater and near-underwater mortgages to refinance with better terms. To learn more about it, you can visit their website.

 

Tips and Cautions

  • Improve your credit score before beginning the home buying process.
  • Save for a down payment. It will save you the cost of extra financing.
  • Be honest about what you can afford on a monthly basis.
  • Don’t forget to include closing costs in your budget.
  • Purchasing a house with someone else can improve your chance of securing decent mortgage terms.

 

Additional Help and Information

The Social Security Administration can help with attaining disability benefits.

Benefits.gov offers a resource of available mortgages and benefits available through the federal government.

The National Disability Rights Network keeps up to date on current news and rights violations.

USA.gov offers information on legitimate home financing.

Govloans.gov offers a listing of home loan options.

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