Homeownership for People with Disabilities

Things You Can Control

There are certain things related to buying a home that you can control. By taking charge of these issues, you can raise your odds of finding and purchasing your own home.

Deciding Whether to Rent or Own

The initial and most important consideration is deciding whether homeownership is really right for you. With homeownership comes responsibilities, and not everyone is ready, or willing, to take those on. Major responsibilities include paying a mortgage on time every month and keeping the property in good living condition. There is no landlord to call if the toilet overflows! You are responsible for everything.

So why take on this big responsibility? Here are some great reasons:

  1. Owning a home can help you build your wealth. Education, small business development, and homeownership are the most common ways to build wealth. Even when the real estate market is doing badly, people who have owned their homes for a long time still can show that the value of their homes has gone up since they bought them. Homeownership is not a get-rich-quick scheme — it’s a strategy for gradually getting wealthier over the long term.
  2. Owning a home has tax advantages. The mortgage interest and property taxes a homeowner pays are generally deductible from income taxes. This deduction can mean big tax savings for people with employment income.
  3. You can prevent your monthly payments from ever going up. If you get a fixed-rate mortgage when you buy a home, the monthly payment for your mortgage will stay the same until you finish paying it off. With a fixed-rate mortgage, the monthly payment you make today is the same as the one you will make next year, in 5 years, and in 25 years!
  4. Homeownership lets you be more independent. It is a great opportunity for personal autonomy and lets you put down roots in your community. You have a lot more choices about how you want to decorate your home, how long you want to stay in an area, and what your house rules are than you have when you are renting. Owning a home also makes you part of the community, someone with a stake in the neighborhood, an equal property taxpayer!

Deciding Where to Live

One of the most important aspects of homeownership is deciding where to live. When you look at homes, try to find something that makes the most sense for your situation. You may want something in a neighborhood you are familiar with or something close to your work or near public transportation. If you have children, you may want to research what the local schools are like.

Nobody can force you to buy a house in an area you don’t like. However, depending on the money you have saved up and your earnings, you may be able to afford living in one area, but not be able to afford to purchase a home in another more expensive area. When you look for a home, you can ask your realtor if there are affordable, growing neighborhoods where you can find a good deal.

Saving Money

There are ways to buy a home even if you have very little in savings. But the bottom line is that the more money you have, the easier the home-buying process will be and the more choices you will have. For example, it is harder to get a loan when you don’t have a lot of money available for the down payment. So you should make it a goal to save up some money.

The money you save to buy a home will actually be used for 2 things:

  1. The down payment. This is the amount of money you will be paying upfront for the house and will not be borrowing from your lender. Down payments are often 20% of the price of the home, but there are options that can let you buy a home with a much smaller down payment.
    Small down payments may result in additional costs and charges, such as Private Mortgage Insurance (PMI).
  2. Closing costs. These are expenses related to buying a home that are not included in the price, such as the appraisal, home inspections, loan fees, and taxes. You should expect the total of these closing costs to be anywhere from 3% to 5% of the price of a home. If you buy a property that costs $100,000, your closing costs will likely be between $3,000 and $5,000.

When you save up money to buy a home, it is very important that all money you have saved must be documented. That means it must be in a bank account. You cannot use cash to buy a home if you are getting a mortgage loan.

Later in this article, we’ll talk about how you can find mortgage loan programs and supports that can help you purchase a home even if you don’t have a lot of savings for a large down payment. We’ll also explain Individual Development Accounts (IDAs), a great program for saving up money for a down payment on your first home.

Managing Your Money

Everyone knows that saving money is important, whether you are buying a house, a car, or just putting aside a few dollars to get out of town once in a while. The challenge is to make it happen. There are 3 important aspects of money management that anyone who wants to buy a home should think about:

  1. Budgeting. This means keeping track of the money you bring in (from jobs, benefits, and other sources) and the money you spend (on gas, utilities, groceries, or other expenses). Budgeting is very important because you can’t save for a house if you are spending more than you are bringing in. One of the initial steps towards homeownership is managing your money so that you can pay all of your bills each month and still have a little bit left over to save in the bank.
Paying yourself first

One well-known savings strategy is known as “paying yourself first.” If your goal is to save $100 per month, as soon as you get paid, transfer $100 into a savings account. You will be much less likely to spend those dollars if they are in a separate savings account, rather than burning a hole in your pocket or checking account. Try it for 6 months and see if this helps you save up some money.

  1. Credit. This is money you borrow. For example, if you have a credit card, you are borrowing money whenever you use your credit card and you are paying the money back when you pay the credit card bill.
Your credit score

Your credit score is a measurement of how well you pay your bills. If you don’t pay your bills on time, don’t make the minimum payments, or go over your credit limit, your credit score will go down. Your credit score is very important to lenders because it helps them decide if you are a “good risk.” If they are going to lend you hundreds of thousands of dollars so you can buy a home, they want to be as certain as possible that you are going to make your loan payments each month.

The bottom line: You won’t be able to get a loan to buy a home if you have a history of not paying your bills.

  1. Paying down debt. If you have debt, it means that you should make it a top priority to lower your debt. That’s because you have to pay interest on your debt each month. If you can reduce the principal on your debt, the amount of interest you have to pay each month will also go down, leaving more money for you to save up for a down payment or to spend on other things you need.

Handling Credit Problems

If you have a low credit score, there are several techniques for dealing with your credit problems. One is to speak to a good mortgage lender who will help you identify the reasons why you have a bad credit score and advise you on the best ways to fix those problems. Another idea is to work with a local nonprofit credit repair specialist. Fixing your credit can take time, but is a necessary step toward homeownership. Among other things, you will probably need to start paying your creditors on time, pay down high balances (the amount you owe on the credit card), and stop any overuse of credit cards.

Note: Not all credit problems are caused because you haven’t paid your bills. Sometimes you may have a credit problem because there is a mistake in your credit report. If there is an error or a dispute related to your credit report, your lender or a credit-repair specialist will be able to help.

Finding New Income Sources

It may seem hard to raise your income if you currently are getting Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). A lot of people with disabilities don’t realize that they could get jobs and raise their income. Even people who get SSI or SSDI benefits can get jobs and in many cases won’t lose their benefits! To read more about programs that let you keep getting your cash or health benefits even when you have a job, read DB101's article on Work Incentives.

Your income is important when you buy a home because it helps decide how large a mortgage you can afford:

  • Banks will not give you a home loan if the monthly mortgage payment would be more than 45% of your adjusted income.
  • It will be much easier to get a loan if the monthly mortgage payment would be 31% or less of your adjusted income.
  • If you get SSI or SSDI benefits, your income will be adjusted to a higher amount when the bank or lender decides whether to give you a loan.
  • If you are on Section 8, you can get a home loan even if your income is lower than the usual standards (this is explained later in this article).

Choosing Your Real Estate Team

Surround yourself with people who can help you achieve homeownership. The most important member of that team is your realtor.

A realtor should:

  • Know about first-time buyer programs
  • Connect you with an appropriate lender or loan program
  • Help you find the right home
  • Locate contractors who can fix up the home if necessary
  • Be available after you move in, if needed

For people with disabilities, a realtor should also:

  • Be sensitive and responsive to your specific situation and needs
  • Understand how your disability impacts your ability to evaluate property both physically and mentally
  • Know about specific financing opportunities for people with disabilities and low incomes
  • Know contractors who can make accessibility modifications

The realtor should help preview properties and help figure out how accessible they are before showing them to you. You may need to clearly communicate your specific needs to the realtor. Remember, you are the customer and the realtor is working for you.

Sometimes, if you talk to an Independent Living Center or other local disability organizations, you can find realtors who specialize in helping people with disabilities purchase their first homes. Ask your friends, neighbors, and other people you know who have purchased a home; hiring the right realtor is critical for your home-purchase team.

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