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- Section 8 voucher program participants may be able to convert their rental assistance into mortgage assistance through a homeownership program.
- Instead of getting assistance with your rent each month, the program will cover a portion of your monthly mortgage payment.
- Not all public housing agencies offer a Section 8 homeownership option.
If you’re a Section 8 participant, you may be able to use your rental assistance voucher to become a homeowner and start building equity.
The housing choice voucher program, commonly known as Section 8, pays a portion of participants’ rent each month. This program, overseen by the US Department of Housing and Urban Development (HUD), helps low-income renters, elderly people, and those with disabilities afford rental housing.
But participants aren’t necessarily limited to being renters. Some Section 8 programs also allow them to use their vouchers to pay a mortgage. If you’re interested in participating, here’s everything you need to know about the Section 8 homeownership program eligibility requirements.
What is the Section 8 homeownership program?
The Section 8 homeownership program, also known as the housing choice voucher homeownership program, lets current Section 8 participants convert their rental voucher into a homeownership voucher.
Instead of paying a portion of the participant’s rent each month, the public housing agency that runs the program will pay a portion of their monthly mortgage payment. Typically, homeowners will need to pay about 30% of their monthly income, and the program will cover the rest.
Not every public housing agency that offers Section 8 assistance offers a homeownership program. You’ll need to contact the agency you have your voucher with to find out if it has a homeownership option.
Section 8 homeownership program eligibility requirements
HUD has some basic requirements for this program, and the public housing agencies that offer it often have their own additional rules.
To qualify for the Section 8 homeownership program, you’ll need to meet these seven requirements:
- Be a current Section 8 housing choice voucher participant
- Have income of at least $14,500 per year (although local agencies may require more)
- Be a first-time homebuyer according to HUD’s definition (meaning you can’t have owned a home in the last three years)
- Work at least 30 hours per week and have been employed for at least a year, unless you’re elderly or have a disability
- Participate in homebuyer education and counseling
- Have no previous defaults on a mortgage while receiving Section 8 homeownership assistance
- Meet your public housing agency’s rules for the program, which may include a minimum savings balance or a minimum credit score to buy a house
Even if you’re eligible, there’s no guarantee you’ll be successful in finding and purchasing a home. It’s important to have realistic expectations and come prepared. If you know that things such as your credit score or cash for a down payment will be barriers, start working on them ahead of time.
Benefits and drawbacks
If you’re able to qualify for it, the Section 8 homeownership program can be life changing.
Lisa Lehman, manager of Key to Own, the Michigan State Housing Development Authority (MSHDA) Section 8 homeownership program, says she’s seen this program stabilize families and give them the tools they needed to succeed.
“I’ve seen families grow up, I’ve seen the kids graduate from college, and it’s been a pretty cool thing,” she says.
The benefit of paying a mortgage versus rent is that the money you put toward your monthly cost builds equity that belongs to you. This can help Section 8 participants financially in the long run.
“It gives them an advantage because rather than paying the landlord’s mortgage, they’re paying their own,” says Jay Reulet, a consultant with Section 8 Consulting.
Having a Section 8 homeownership program can also save the public housing agencies that run them money.
“It’s almost $200,000 less a month for us to put them in a house than it is for us to have them renting,” Lehman says.
But there are some barriers that Section 8 participants will have to overcome if they want to become homeowners. For starters, the program isn’t offered everywhere. They’re also often underfunded and understaffed.
In Michigan, for example, there are more than 100 public housing agencies, but only a handful offer Section 8 homeownership programs, Lehman says. At MSHDA, Lehman runs Key to Own with one other employee.
On an individual level, it can be difficult for very low-income individuals to meet the demands of the program.
Lehman says one of the biggest challenges applicants face is building their credit. Key to Own requires a minimum credit score of 640 with at least $1,300 saved and no debt.
Another challenge is that the mortgage assistance doesn’t last for the life of the loan unless you’re elderly or have a disability. In most cases, assistance is limited to 10 or 15 years. Once your voucher expires, you’ll have to be able to cover the full monthly mortgage payment.
Lehman says she works with homeowners in this situation to find ways to make their payments more affordable. Refinancing a home with a longer term, for example, can help lower their monthly payments.
Reulet says that to be successful in the program, you’ll need to do a lot of research and preparation, and be really motivated. Ultimately, he says that he sees very few of his clients successfully purchase a home with this program.
One of the problems, Reulet says, is that those receiving rental assistance through the housing choice voucher program often aren’t able to cover the other expenses associated with buying a home, like closing costs.
But additional forms of financial assistance, such as down payment loans or grants, can help bridge this gap. If you’re considering applying for this program, find out if your city or state offers assistance for homebuyers who need help with their down payment or closing costs.
Section 8 homeownership program pros and cons
6 steps to apply for the Section 8 homeownership program
If you’re a current housing choice voucher program recipient and you think you could benefit from this program, here’s what you need to do to apply:
- Find out if your public housing agency offers a Section 8 homeownership option. You can find your public housing agency’s contact information on HUD’s website.
- Determine if you meet the requirements to apply. If you’re not there yet, work on improving your credit score, saving a little bit of money each month, and paying down debt if you’re able to.
- Apply with your public housing agency.
- Complete the required homeownership education and counseling.
- Get preapproved with a mortgage lender and start shopping for homes. Be sure the homes you’re considering are in decent condition, as they’ll need to pass an inspection.
- Once you find a home and have an offer accepted, you’ll prepare for closing.
Once you’re in your home, you’ll make your monthly mortgage payment with assistance from the Section 8 program. The amount of assistance you’ll receive will depend on your income.
Section 8 homeownership program FAQs
If the public housing agency you get your Section 8 rental voucher through offers a homeownership option, you may be eligible to purchase a home through the program.
Section 8 vouchers provide rental assistance to low-income people, elderly individuals, those with disabilities who meet program guidelines. The Section 8 homeownership program enables voucher holders to use their assistance toward a mortgage payment, rather than rent.
To find out if you can buy a house with Section 8 in your state, you’ll need to contact the public housing agency you receive your voucher through. You can also access the enrollments report for the homeownership program on HUD’s website, which will give you an idea of which agencies in your state offer the program.
