Types of Low-income Loans to Buy a House
Low-income housing may be widely available in many areas of the U.S., but in some places borrowers struggle to achieve home ownership. In general, the government has been relatively successful in implementing some low-income loan programs to help subsidize struggling communities. Taking advantage of these loans means being aware of the options, conditions and eligibility requirements.
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Rural Housing Service Loans
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Rural Housing Service loans provide low-income rural borrowers with loans for housing. The most popular and widely available program in the RHS program is the 502 Direct loan. These loans finance up to 100 percent of the estimated value of a particular property. The funding also provides payment assistance, if needed. These loans can also be obtained to rehabilitate or renovate a home.
Title VI Loans
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Title VI loans are designed to help Native American communities increase homeownership. In particular, these loans come with a federal guarantee that repays any losses attributed to borrower default. These loans are usually available to organizations only and then disbursed to individual borrowers at the discretion of the organization's leadership.
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Section 8
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Section 8 housing is one of the most common low-income loan programs. While the funds are not always in the form of loans--in many areas this money is used to pay a percentage of an individual's rent--the assistance often needs to be repaid.
504 Loans
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Another loan serviced and collected by the RHS, 504 loans offer financial assistance to individuals interested in repairing homes that have safety issues. These loans come with 20-year terms and 1 percent interest rates. In some cases, usually when applicants are over 62-years old, these loans are actually grants.
Warning
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Low-income borrowers must be aware of low-income housing scams. If a lender is unaffiliated with the federal government, chances are the programs offered are not truly low-income loans. Sub-prime lenders have often been accused of targeting low-income borrowers and then charging exorbitant fees and interest.
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