Even in an environment of rising house prices, low-to-moderate income earners may still be able to become homeowners, even with a modest down payment or a limited credit history. Opportunities may exist for homebuyers with moderate incomes through programs from cities, nonprofit organizations, and financial institutions.

These examples, based on the experiences of typical homebuyers with low-to-moderate incomes, outline different paths to homeownership without large down payments or perfect credit scores.

Sarah: Just starting out

Sarah is a recent college graduate who just landed her first professional job.  She’s ready to become a homeowner because she has a stable career, plans to live in the home for the foreseeable future, and has enough money for a small down payment on a home.

yourFirst MortgageSM from Wells Fargo might help Sarah achieve her goal, even without a large down payment. Features for the fixed-rate option include:

  • Low 3% down payments on a fixed-rate mortgage
  • Flexible income guidelines
  • Potential closing cost credit for completing an approved homebuyer education course, with an eligible down payment

Keep in mind that mortgage insurance is required and will increase the cost of the loan and monthly payment.

Whether a first-time home buyer or not, this program is available as an option to apply for; a home mortgage consultant can discuss loan amount, loan type, and property type to determine eligibility.

Beth: Modest homeownership dreams

Beth lives near a small town in the country with her husband and little boy. Their income is steady but modest, allowing them to afford monthly housing payments but not save much. Beth is renting a home now and has always wanted to become a homeowner, but doesn’t know her options.

Beth’s family, like other low-to-moderate income buyers in rural areas, may be eligible for financing through the Guaranteed Rural Housing Program administered by the U.S. Department of Agriculture (USDA) Rural Development. These loans feature:

  • Financing of up to 100% with no required down payment
  • Long-term fixed-rate terms, helping to keep principal and interest payments predictable over the life of the loan
  • The ability to finance closing costs, the guarantee fee, legal fees, and other prepaid fees

Borrowers will pay a one-time guarantee fee and an annual fee to the USDA's Rural Development program. The monthly mortgage payment will include the annual fee, and may include the guarantee fee. These fees will increase the cost of the loan and monthly payments.

Rick: Finding a home for his family

Rick is an active-duty service member who recently has returned from a long tour overseas. He and his wife dream of raising their two young children in a home of their own.

Rick and his wife may be eligible to purchase their first home with a Department of Veterans Affairs (VA) loan. Benefits and considerations of doing so include:

  • Because VA loans offer low- and no-down-payment options, Rick and his wife can reserve part of their savings for home repairs and unexpected expenses.
  • Rick may be able to receive a grant from the government to use toward closing costs.
  • Because VA loans don’t require monthly mortgage insurance, Rick and his wife will instead pay a one-time VA funding fee (a percentage of the loan amount based on type of loan, military category, first-time and prior use of entitlement, and down payment amount).

Becoming a successful homeowner

To help you become a successful homeowner, think carefully about the decision to buy, making sure that homeownership suits your personal and financial situation. Buying a home involves much more than securing a loan and making monthly payments.

To help get started, the Wells Fargo My FirstHome® interactive module provides an overview of the path to successful homeownership, and the My Home RoadmapSM service provides free homeownership counseling and support materials to borrowers who are not yet ready to purchase a home.

If you’re ready to purchase a home but the scenarios discussed above don’t mirror your own, keep in mind that you may still be eligible for purchase with assistance from your city, county, or state. Wells Fargo also has several programs to help make homeownership a possibility for many low-to-moderate income homebuyers.