How to Buy a House With a Section 8 Voucher

The Section 8 Homeownership Program offers a path for eligible individuals and families to transition from rental assistance to homeownership. While Section 8 is widely recognized for its rental voucher program, it also provides an opportunity to use housing assistance payments to help cover expenses associated with owning a home. This initiative aims to empower participants by fostering financial stability and building equity through property ownership.

Understanding the Section 8 Homeownership Program

The Section 8 Homeownership Program allows participants in the Housing Choice Voucher (HCV) program to apply their monthly housing assistance towards homeownership expenses instead of rental costs. This initiative extends the broader Section 8 program, which is federally funded and administered by local Public Housing Agencies (PHAs). Its purpose is to facilitate homeownership for low-income families.

A key distinction from the rental voucher is the shift in how the subsidy is applied. Instead of directly paying a portion of rent to a landlord, the assistance helps cover various costs associated with owning a home. The intent changes from covering a rental unit to supporting the financial obligations of a homeowner, moving families towards self-sufficiency.

PHAs have the discretion to offer a homeownership program, as it is not mandatory for all. If a PHA implements such a program, it uses existing Housing Choice Voucher funding to provide this homeownership assistance.

Eligibility Requirements for the Program

To qualify for the Section 8 Homeownership Program, individuals and families must meet specific criteria established by their local PHA. A primary requirement is current participation in the Housing Choice Voucher program and being in good standing. Applicants must generally be first-time homebuyers, meaning no one in the household has owned a home or had an ownership interest in a residence for at least the past three years.

The program also includes income and employment stipulations. Except for elderly or disabled families, adult family members who will own the home must have a qualified monthly income not less than the federal minimum hourly wage multiplied by 2,000 hours. Non-elderly or non-disabled applicants must generally be employed full-time, defined as at least 30 hours per week, and have been continuously employed for at least one year before receiving assistance.

Families must also demonstrate a responsible financial history, including not having previously defaulted on a mortgage while receiving voucher homeownership assistance. Applicants must complete homeownership and housing counseling programs as required by the PHA.

Preparing for Homeownership with Section 8

Preparation is crucial for individuals seeking to purchase a home through the Section 8 Homeownership Program. A foundational step involves completing mandatory homeownership counseling, required by all participating PHAs. This counseling covers essential topics such as budgeting, credit repair, understanding mortgage terms, and home maintenance responsibilities.

Securing mortgage pre-approval is another significant preparatory action. Participants need to work with a mortgage lending institution to become credit-qualified and pre-approved for a loan. Lenders typically require financial documentation, including income verification, employment history, and credit reports, to assess eligibility and determine the loan amount.

The chosen home must also meet specific PHA requirements before a purchase can proceed. This includes passing a Housing Quality Standards (HQS) inspection conducted by the PHA to ensure the property is safe, sanitary, and in good condition. An independent structural inspection is also typically required, arranged and paid for by the family, with a copy of the report provided to the local Section 8 program.

The Home Purchase Process

After meeting eligibility requirements and completing preparatory steps, the home purchase process begins. The first action involves submitting a request to the PHA to convert the rental voucher to the homeownership program. This initiates the PHA’s review and approval process for the specific home identified by the participant, assessing if it meets program criteria, including purchase price and property standards.

The PHA plays a central role in approving the mortgage and the overall purchase price. They review the sales contract and any addendums to ensure alignment with program guidelines. Once the PHA provides preliminary approval, a final Housing Quality Standards (HQS) inspection of the property is scheduled and conducted to confirm it adheres to health and safety standards. This inspection is separate from the independent professional inspection conducted during the preparation phase.

The closing process for the home purchase follows the PHA’s final approvals. At closing, the transfer of the housing assistance payment from the PHA commences, typically directed towards the mortgage lender or an escrow account to cover eligible homeownership expenses. The sales contract must be provided to the housing authority to receive Section 8 support. The family must occupy the home as their primary residence, with no subletting allowed.

Financial Aspects of Section 8 Homeownership

Once a home is purchased, the Section 8 subsidy helps with ongoing homeownership expenses. The monthly housing assistance payment (HAP) is calculated based on factors such as the family’s adjusted income and the local payment standard set by the PHA. The family is generally responsible for approximately 30% of their adjusted monthly income towards housing costs, with the PHA covering the remainder up to the payment standard.

The Section 8 subsidy can cover various eligible homeownership expenses. These commonly include principal and interest payments on the mortgage, mortgage insurance premiums, property taxes, and homeowner’s insurance. Additionally, the PHA may provide allowances for utilities, routine maintenance costs, and major repairs or replacements. For cooperative or condominium units, the assistance can also extend to operating charges or maintenance fees assessed by the homeowner association.

There are limitations on the duration of this assistance for most families. For mortgages with a term of 20 years or longer, assistance is typically limited to 15 years. For shorter mortgages, the maximum term of homeownership assistance is generally 10 years. These time limits do not apply to elderly or disabled families, who can receive assistance as long as they remain eligible. Participants are generally responsible for down payments and closing costs, though some programs may offer assistance, with a minimum of 1% of the down payment often required from the family’s personal resources.