If you receive Social Security disability benefits and you're considering buying a house, you might have questions about whether it could affect your eligibility for the benefits you depend on. The answer might depend on the type of benefits you receive. Two separate Social Security programs provide individuals with disability benefits: Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
Social Security doesn't prohibit individuals who receive disability benefits—under either the SSDI or SSI program—from purchasing a home or using their monthly disability payments to fund the purchase of a house. But SSI recipients could run into trouble if they try to save up money for a down payment.
While there is no limit on assets for the SSDI program, recipients of SSI benefits are subject to certain resource limits. The SSI program has an asset limit of $2,000 for a single person and $3,000 for married couples. Many categories of assets are excluded from the calculation of total assets, however, including your principal residence (as well as the land a home sits on and any accessory buildings). But if an SSI recipient saves more than $2,000 (or $3,000 for a couple), the Social Security Administration (SSA) could suspend their benefits.
Monthly SSI payments are so low that not many SSI recipients can put aside money for a down payment anyway. And SSI benefits alone typically aren't enough to pay mortgage payments. But the SSI program does allow recipients to earn a small amount of income while remaining eligible for benefits, so it might not be impossible to buy a house with others, possibly with help from family.
Fortunately, there are several programs that can help people who are receiving disability benefits buy a house, which we'll explore below.
Mortgage lenders want to see that a mortgage applicant will have enough income to pay the monthly principal and interest due on the home loan. Banks will consider Social Security disability income as part of your gross monthly income, just as they will count Social Security retirement benefits as income. The mortgage lender will ask you to get a benefits letter from the SSA to document your income.
For someone receiving a large amount of SSDI, qualifying for a mortgage is less likely to be a problem. (Average SSDI payments are about $1,300 per month, but they can go up to about $3,000 per month.) SSI applicants are more apt to have difficulty qualifying for a mortgage, since the average SSI payment is around $500 a month.
While banks and other mortgage lenders might determine that someone who is dependent on SSDI or SSI benefits can't financially afford a proposed mortgage, lenders are prohibited by law from denying a mortgage just because an applicant is disabled. A lender should not ask you about the nature of your disability or for documentation from your doctor.
The federal Fair Housing Act makes it illegal for lenders to engage in certain discriminatory practices against people with disabilities. Prohibited practices include:
Various federal, state, local, and private organizations provide financial assistance or other logistical support to people who receive disability benefits or who have low income and want to buy a house. Here are some of the national programs that offer help.
Many mortgage assistance programs for disabled individuals allow applicants to use money from sources other than their own savings for down payments. (Traditional mortgage programs don't, for instance, allow you to borrow from family or friends for the down payment.)
If you're receiving limited income from disability benefits, here are some options that might provide you with sufficient funds to make a down payment on a house:
People who apply for disability benefits because they can't work sometimes go into debt while waiting for their application to be approved. Having late payments or substantial debt can have a negative impact on their credit scores.
Fortunately, most of the loan and mortgage assistance programs listed above have very generous standards for applicant eligibility, including accepting individuals with poor credit. For example, the FHA will insure loans for individuals with credit scores as low as 580, while Fannie Mae-backed mortgages may be offered to applicants with credit scores as low as 620.
Updated April 11, 2022