Buying a home with a Section 8 voucher: the homeownership option

If you have a Section 8 voucher, you may think it is only for renting. But HUD’s rule includes a homeownership option: your housing authority can use the voucher’s assistance to pay part of your mortgage and home costs, instead of rent.¹ Not every authority offers it, and it has its own requirements. This guide explains them step by step, using the federal rule.

The most assistance lasts with a mortgage of 20 years or more (no limit for elderly or disabled families)

15 years²

A week on average: the full-time work required, with exceptions

30 hours²

Without owning a home to count as a first-time homeowner

3 years²

How the homeownership option works

The homeownership option assists a family living in a home bought by one or more of its members. You can be a family new to the program or one that already has a voucher. There are two forms of assistance, and you can receive only one:¹

1. Monthly payments. The authority pays part of your home costs each month, the way it would pay part of your rent.
2. A single down payment grant. One-time help at closing. Careful: the rule says the authority may not offer this grant until HUD publishes a notice in the Federal Register, so ask whether it is available where you live.²

The authority may offer one form, both or neither. But if it is needed as a reasonable accommodation for a person with a disability, it must offer it. And if it does offer it, you decide whether to participate.¹ Our guide Reasonable accommodations for disabilities explains how to request an accommodation.

One important protection: the authority may not require you to repay the assistance when you sell or refinance the home.¹

Who qualifies

Besides being admitted to the voucher program, your family must meet several conditions when assistance starts:²

• First-time homeowner. No one in your family can have owned a home in the three years before assistance starts. Single parents and displaced homemakers also count. There are exceptions for cooperative members and for families with a person with a disability who needs the option as a reasonable accommodation.
• No ownership today. No one in your family can own a home when assistance starts.
• No prior default. No one who was in a family that defaulted on a mortgage under this program.
• A signed contract of sale.

Minimum income. The adults who will own the home must earn at least the federal minimum wage times 2,000 hours a year. For a disabled family, the minimum is 12 times the monthly SSI benefit for one person. Welfare assistance does not count toward that minimum, except for elderly or disabled families. Your authority may set a higher minimum, but if you meet HUD’s and have a sufficient prequalification or preapproval, you meet it.²

Employment. One or more adults who will own the home must work full time (an average of at least 30 hours a week) and have done so continuously during the past year. The authority may count successive jobs and self-employment, and decides whether a gap breaks continuity. This requirement does not apply to elderly or disabled families, and the authority may not add any other employment requirement.²

The authority may set other requirements, but they must be in its Administrative Plan.² If your family has mixed immigration status, the voucher rules still apply: our guide Section 8 and mixed-status families explains how assistance is calculated.

The path, step by step

From your voucher to your home

1. 1. Ask whether your authority offers the program

   Today

   Ask for its Administrative Plan, with its financing and time rules.²

2. 2. Check whether you qualify

   This week

   First-time homeowner, minimum income and employment, with exceptions.²

3. 3. Complete the required counseling

   Before you buy

   With a HUD-certified counselor at a HUD-approved agency.²

4. 4. Get your preapproval

   Before you shop

   The authority may review the lender and the loan terms.²

5. 5. Find a home and sign the contract

   Within the time the authority sets

   The contract must include the independent inspection and that you do not pay for repairs.²

6. 6. Pass both inspections

   Before closing

   The authority's and one by an independent inspector you choose and pay.²

7. 7. Close and start assistance

   At closing

   You sign the statement of family obligations before assistance begins.²

The authority may set a maximum time to find and buy a home. If you cannot do it in time, it may issue you a voucher to rent or put you on the waiting list.²

The required counseling

Before assistance starts, you must complete the counseling program your authority requires. It must be given by HUD-certified housing counselors working at a HUD-approved agency. Suggested topics include home maintenance, budgeting, credit, negotiating the price, getting a loan and a preapproval, finding a home, fair housing and fair lending, and how to identify and avoid loans with oppressive terms.²

Our guide HUD-approved housing counselors explains how to find one, and Homebuyer education courses what to expect from the course.

The home: what type and which inspections

The home must be a one-unit property, including a manufactured homemanufactured homeA manufactured home is a home built in a factory and moved in one or more sections, on its own chassis, to the site. Federal law defines it this way, with or without a permanent foundation, including its plumbing, heating, air-conditioning and electrical systems. Many people call it a mobile home or trailer. For Fannie Mae, it must meet HUD's federal standards; modular homes and what it calls prefabricated or panelized homes do not count as manufactured homes. It can be titled as real estate, generally when it sits on a permanent foundation on land the owner also owns, or as personal property, which is usually financed with a chattel loan.See the full definitionClose, or a unit in a cooperative or a condominiumcondominium (condo)A condominium (condo) is a one-family home in a project where each owner owns their unit and shares ownership of the common areas with the other owners. Units can be attached, semi-detached or detached. The owners make up an association that manages the money and the common areas, and you usually pay condo or homeowners association (HOA) fees separately from your mortgage payment. If you do not pay them, the association can pursue debt collection and even foreclosure. In Texas, condominium insurance covers your belongings and the interior of your unit.See the full definitionClose. It must meet the program’s housing quality standards. If you will not own the land, the home must be on a permanent foundation and you must have the right to occupy the site for at least 40 years.²

There are two inspections:²

1. The authority’s, which confirms the home meets the quality standards.
2. One by an independent professional inspector you choose and pay. It must cover the foundation and structure, interior and exterior, roofing, plumbing, electrical and heating. The authority may not make you use an inspector it chooses. The inspector sends the report to you and the authority, which may reject the home based on it.

Your purchase contractpurchase agreementA purchase agreement is the written contract between you and the seller that is final once the seller accepts your offer and both of you sign it. It gathers the details of the sale: the names of the buyers and sellers, the total price, the real estate agent's commission, the requested closing date and the contingencies. You use it to get your loan, and it is submitted with the closing paperwork. The settlement agent pays out the money according to the contract and the loan, and whether the seller pays some closing costs is also set by the contract.See the full definitionClose must state the price and terms, that you will arrange an independent inspection, that you are not obligated to buy if the inspection does not satisfy you and that you are not obligated to pay for necessary repairs.² Our Home inspection guide explains what an inspector checks.

The loan and what the authority pays

The loan. The authority may set requirements for your loan: for example, banning seller financing or balloon-paymentballoon paymentA balloon payment is a large, one-time payment at the end of the loan term, higher than the payments before it and sometimes much higher. On the Loan Estimate, "Balloon Payment" means any payment that is more than two times a regular payment. Loans with a balloon payment usually have shorter terms and lower monthly payments that do not pay off the whole debt. If you cannot make the final payment, you may have to refinance or sell the home, or face foreclosure. With limited exceptions, a Qualified Mortgage (QM) cannot have a balloon payment.See the full definitionClose loans, requiring a minimum of your own resources or protections against predatory loans. FHA loans follow FHA rules. The authority may review the lender and terms, and reject a loan you cannot afford, considering other expenses such as child care and medical costs.² Some authorities require a down paymentdown paymentThe down payment is the part of the home's price you pay out of your own pocket when you buy; the loan covers the rest. In U.S. Spanish it is also called enganche, cuota inicial or entrada. Each loan type has its own minimum: FHA requires at least 3.5% of the value, VA and USDA loans may require none, and conventional loans ask for more if you want to avoid private mortgage insurance. A larger down payment lowers the loan, the monthly payment and the total interest; many state programs help families put it together.See the full definitionClose of at least 3% of the price, with at least 1% from your own resources.¹ Our FHA loan guide explains that program.

The authority’s monthly payment. It is the lower of these two amounts:²

• The payment standard minus your total tenant payment, or
• Your monthly home expenses minus that total payment.

Counted expenses include mortgage principal and interest and mortgage insurance, property taxproperty taxProperty tax is the tax the county, city, school district and other local bodies charge real property owners every year to pay for schools, police, fire and other public services. It is computed on the value the assessor's office assigns to your home, at each body's rate, minus the exemptions you qualify for, such as the primary-residence exemption in many states. If you have a mortgage you normally pay it month by month inside your payment, through the escrow account. It is generally deductible on your federal return if you itemize.See the full definitionClose, home insurancehomeowners insuranceHomeowners insurance pays for losses and damage to your property if something unexpected happens, like a fire or a burglary, and usually includes liability coverage if someone is hurt at your home. Lenders require it as long as you have a mortgage, because the home is their collateral, and almost always collect it inside your monthly payment through the escrow account. The price depends on the location, the rebuilding cost, the deductible and your history. A standard policy does not cover floods or, in many states, earthquakes: those risks are insured separately.See the full definitionClose, the authority’s allowances for maintenance, major repairs and utilities, land lease payments if you do not own the land and, for condos and co-ops, association fees. The payment goes to you or, if the authority decides, to your lender. And assistance ends automatically 180 days after the last payment.²

Example with real numbers

A family with a voucher buying their first home

An example in words, not a real case, of how the assistance is calculated.

Their total tenant payment

The same as when they rented, based on their income

The monthly home expenses

Mortgage, mortgage insurance, taxes, home insurance and the authority's allowances

The authority's payment

The lower of the payment standard or those expenses, minus their total payment

Their mortgage is 30 years

Assistance can last up to 15 years

What they do to avoid falling behind

Save every month for when the assistance ends or costs rise

The rules come from HUD's rule.²² Use the how-much-house calculator to see a price you can sustain.

Run it with your numbersHow much house can I afford?

How long assistance lasts and your obligations

How long it lasts. Except for elderly or disabled families, monthly assistance lasts at most 15 years if your initial mortgage is 20 years or longer, and 10 years in other cases. The limit adds up assistance received for different homes or authorities. For elderly or disabled families there is no limit; if the family stops qualifying as such, the limit starts to apply, but it gets at least 6 more months of assistance.²

Your obligations. Assistance is paid only while you live in the home. You must keep up with your mortgage, attend ongoing counseling if the authority requires it, give it any information it asks for about your mortgage and expenses, tell it before you move out and tell it if you fall behind on the mortgage. While you are assisted, no one in your family may own another home. Before assistance starts, you sign a statement of obligations.²

If you want to move. You can buy outside your authority’s area if the receiving authority runs a voucher homeownership program and is accepting new families.²

Because the assistance ends, plan from day one: save each month for repairs and for when the help stops. Our guide First year as a homeowner explains the costs people do not expect, and the family budget tool helps you plan.

If this is you

You are an older adult with a voucher

The employment requirement does not apply and there is no time limit on assistance.²

Someone in your family has a disability

The authority must offer the option if needed as a reasonable accommodation.¹

You are self-employed

The authority may count self-employment for the employment requirement.²

You are a single parent and owned a home before

Single parents can count as first-time homeowners.²

You found a home you like

Make sure the contract says you do not pay for repairs and can walk away if the inspection is not satisfactory.²

Your income is low

Check the minimum: the federal minimum wage times 2,000 hours, or 12 times SSI for a disabled family.²

Mistakes that cost you

• Mistake: Assuming your authority has the program.

  Instead: Each authority decides whether to offer it; ask and request its Administrative Plan.¹

• Mistake: Signing a contract without the inspection clause.

  Instead: The contract must say you are not obligated to buy if the inspection does not satisfy you.²

• Mistake: Using the inspector the seller recommends without thinking.

  Instead: You choose and pay the independent inspector; the authority cannot impose one.²

• Mistake: Taking a balloon or seller-financed loan without asking.

  Instead: The authority may ban them and reject loans you cannot afford.²

• Mistake: Moving out without telling the authority.

  Instead: You must tell it before you move; assistance is paid only while you live in the home.²

• Mistake: Hiding a missed mortgage payment.

  Instead: You must tell the authority if you fall behind; get help from a counselor right away.²

• Mistake: Not planning for when assistance ends.

  Instead: With a mortgage of 20 years or more, assistance lasts up to 15 years; save from the first month.²

What to do this week

1. Call your housing authority and ask whether it offers the voucher homeownership option.¹
2. Ask for its Administrative Plan and read the financing, time and income requirements.²
3. Gather proof of your income and employment over the past year.²
4. Find a HUD-approved housing counselor for the required counseling.²
5. Use the how much house can I afford calculator to see a price you can sustain.²
6. Also read Community land trusts, Habitat and other affordable homes for other paths.