Among the many goals the average person has is having our own place. While there’s a significant difference between renting a place and owning one, it’s just nice to have a spot to call your own. Unfortunately, the economy has been going insane lately. Thanks to the ongoing pandemic, real estate prices have skyrocketed. In 2021, the real estate market went through the highest ever increase to happen over 12 months. According to professionals, the average house pricing increased by 18.6 percent in one year. Obviously, this inflation shouldn’t stop anyone from having a safe roof over their heads. But the problem is being able to have your own place without spending most of your monthly budget. And, that’s where government housing assistance options step in.
The federal government created a lot of these government housing assistance options to improve the living standards in the country. If you think about it logically, less homelessness leads to a better society. Also, if there are more affordable housing options, people can spend their money on other stuff, stimulating the economy. Another way to look at it is that if people have stable housing, they can work on improving other aspects of their lives, such as family relations and career development. There’s a really long list of government housing assistance options. For this article, we’re looking at a couple of options that might just work out for you.
The Type Of Government Housing Assistance Options You Can Find
The idea behind these housing assistance options is to help out people who struggle financially with housing. The main focus is usually on those with low income and those who spend too much of their income on their housing. So, the housing assistance options offered by the government vary from rental assistance to mortgage assistance, all the way to affordable houses that you can buy. The trick to knowing about which options to go for lies within knowing which ones you’re eligible for.
For more information on housing assistance options, check out the Department of Housing and Urban Development (HUD)’s website. You should also look into Benefits.gov for information on many kinds of government assistance programs. The website will also help you find out which programs you’re eligible for.
To understand how this program works, we need to discuss what foreclosure is and why it happens. To put it simply, foreclosure is when a lender takes away the property that you bought through financing. So, if you took a loan/mortgage from a bank to buy a home, and didn’t pay it back, the bank will most likely take away the home. A similar thing can happen when you borrow from the government. A lot of folks out there will take a mortgage from the Federal Housing Administration (FHA) to buy their own homes. As you can imagine, plenty of people there can’t make their mortgage payments. That’s when HUD will foreclose the homes.
What’s So Special About FHA Loans?
FHA loans were designed to help low- and moderate-income families buy their own homes. What makes the program so good is that the government will ensure your loan. That means borrowers will be able to get loans from private lenders, such as banks with lower credit score requirements. The loans will also require you to put a relatively little amount of cash as a down payment.
If a borrower has a credit score of 580 or above, they may be eligible for loans that cover up to 96.5% of the house value. That would leave the borrower with only 3.5% of the house value to pay out of pocket. Lower credit scores may work out too. Credit scores between 500 and 579 may qualify borrowers for loans that cover up to 90% of the house value.
Here’s How You Can Buy a HUD Home
So, the process of buying HUD houses is done through bidding. HUD is not in the business of making a profit out of their sales, which is why the houses are so cheap. Technically, there is no minimum amount that you can bid on. HUD is likely to accept bids that are 85-88% of the house’s value. However, if you bid too low you risk 2 things. First, you’d obviously risk getting outbid. Second, if your bid is too low, HUD might just reject your bid altogether.
Before you actually put in your bid, here’s a few things you know and do:
- Identify a realistic budget for the house you plan on buying.
- Visit HUD’s website and take a look at the listings available. Look at their details and where they’re located so you can compare them to other options. Some listings will only come with one picture, so you might need to visit the house to get the full picture.
- Find a HUD-licensed realtor, only those guys are allowed to put the bid in for you. You can use the realtor mentioned on the listing, or any other HUD-licensed realtor of your choice.
- You should probably visit the home yourself. Look around, take pictures, and take notes. You should know about repairs or improvements the house would need before you buy it.
- It’s probably a good idea to hire a professional inspector to give you a detailed breakdown of the house’s condition.
- HUD will limit bidding for homes for the first 30 days of the listing to people who actually plan to live in them. After 30 days, the listing will also be open to real estate agents. So, it’s a good idea to bid as soon as you can.
Once you’re done with all of that, estimate the value of the house. Then, place your bid through your realtor. If you get outbid, or your bid gets rejected, bid again with a higher amount if you’re interested. You should also check for any price drops. HUD typically drops the price of houses by 10% for every 30 days it doesn’t get sold.
This program allows law enforcement officers, firefighters, emergency medical technicians, and teachers to purchase houses from HUD with a 50% discount. There are 2 conditions that must be met to benefit from this program:
- The house must be located in a revitalization area. Revitalization areas are HUD-approved areas, authorized by Congress “to promote revitalization, through expanded homeownership opportunities.”
- Applicants must agree to live a minimum of 36 months in the house
HUD will typically have separate listings that are available for sale under the Good Neighbor Next Door Program.
This is another program created by HUD to help out low-income families. What’s different about this one is that it offers house rental assistance, rather than house purchase. The program goes by another name, Housing Choice Vouchers (HCV). These vouchers help low-income families pay for safe and sanitary rental housing. The idea is to help these families save money they’d normally pay on rent, giving them the ability to spend it on other necessities, such as food, and education.
Although the program was created by HUD, it’s mainly operated by local Public Housing Authorities (PHA). PHAs will always be your most reliable source on section 8 housing. These offices are also where the application for the program starts. So, if you’re interested, drop by your local PHA and learn more about Housing Choice Vouchers. To find the nearest PHA, visit HUD’s website and check out the PHA map.
Eligible applicants typically should expect to pay 30% of their income towards their rent and use the vouchers to pay off the rest. Obviously, not every landlord will accept these vouchers. So, a part of the process towards applying for section 8 is to find a house whose rent can be paid for using these vouchers.
Eligibility For Section 8 Housing
Since the PHA will be responsible for your application, they will be the ones to decide whether you’re eligible or not. You also need to keep in mind that every PHA might have different eligibility terms, so definitely check in with your local one. However, there’s a general set of qualifying conditions you need to meet for the Section 8 program:
- Applicants must be at least 18 years of age
- The program is meant for US citizens and eligible immigrants. Eligibility will depend on the applicant’s residence status. For permanent status, the process should be smooth sailing. It’s only when dealing with temporary or nonofficial residents might the PHA think of rejecting the application right away
- Folks applying for Section 8 must have no drug-related criminal record. PHAs will often focus specifically on the 3 years before you start your application
- Since the program is meant for low-income families, qualifying applicants need to be just that. You basically need to be making less than 50% of your area’s median. So the average income in your city is $50,000, you shouldn’t make any more than $25,000.
Here’s How The Typical Section 8 Should Go
- Visit your local PHA and ask any and all questions you might have. You can never have too much information before getting started. Here’s the map once more if you need to find your local PHA.
- After you ask all the questions you have, confirm that you’re eligible for the program according to that PHA.
- From there, you should start filling in your application. Note that if you provide any false information, that will only delay your application process.
- If all of your papers are in order, hand in the application. If the PHA accepts the application, they’ll ask you to wait until they contact you. PHAs will contact applicants whether they’re accepted or rejected. They will also provide reasons in case of rejection.
- If your request is accepted, the PHA will place you on a waiting list.
- Keep in mind that PHAs will prioritize applications from certain special cases first. Those special cases include disabled people, the elderly, veterans, and homeless people. Local residents will also have a higher priority when applying.
- You should use the time that you spend on that waiting list to find houses that will accept housing choice vouchers. The program will allow you to rent houses, townhouses, or apartments.
Documents Required For A Section 8 Application
At the risk of sounding like a broken record here, but requirements might differ from one PHA to another. So, definitely ask your local PHA what documents you’ll apply for. However, you’ll generally need these documents to apply for Section 8 anywhere:
- Birth certificates for all family members
- Social security cards for all family members
- Driver’s license
- State or alternate government-issued photo ID
- Passports for registered alien/immigrant family members, along with immigration papers
- Signed verification of immigrant status
- Social Security Verification Letter and Proof of Benefits
- Proof of income (receipts, tax returns, W2)
- Bank statements
- Documentation of public assistance benefits
- Information on any owned asset
Having a safe roof over your head is important. But, let’s face it, the economy has not been doing great lately. Salaries aren’t increasing much, but somehow house prices are going through the roof. That’s why you should look into affordable housing options offered by your government.
If you’re looking to buy a new place, check HUD houses. HUD houses are houses foreclosed by the government from people who failed to pay off their FHA loans. The government doesn’t aim to make a profit from these houses, so they can go for pretty decent prices. But look carefully, and take the necessary steps to get a house for yourself.
If you’re looking to rent a place and you’re struggling with money, look into Section 8. The program could provide you with a voucher to help out with rent if you’re eligible. Contact your local PHA to learn more, and start your application there.