Think You Can’t Afford to Buy a House? Bet You Didn’t Think of This Program

A group of volunteers get ready to build a home on behalf of Habitat for Humanity.
Volunteers receive instructions before beginning work at a Habitat for Humanity building project Monday, Oct. 7, 2019, in Nashville, Tenn. (AP Photo/Mark Humphrey)

Are you having trouble trying to buy a house? Would you like to save up to $90,000 and get a brand-new home?

If you answered yes to these questions, Habitat for Humanity might be able to help you out.

You may think Habitat for Humanity is only for people living in poverty, or that they give away houses. Neither statement is true.

In fact, you have to have a steady income that’s high enough (but not too high) to qualify for a Habitat house, along with decent credit. And you have to make mortgage payments just as with any other home purchase.

I held a few of these common misconceptions about Habitat for Humanity before I started volunteering with them. Here’s what I learned about this nonprofit organization from my experience and further research.

How Habitat for Humanity Works

Habitat for Humanity states “Every person should have a decent, safe and affordable place to live,” and I saw firsthand how smart they are about working toward that goal.

For example, they build small homes so homeowners have lower costs for future maintenance and utilities. That’s very different from lenders and real estate agents I’ve met who seem to think we should all buy the biggest house possible.

They also won’t build homes for those who can’t afford them. This isn’t a giveaway: Habitat homeowners buy their homes and have monthly mortgage payments.

In the U.S. this is all arranged through one of their 1,400 affiliates. Each affiliate has its own rules, but in general you have to:

  • Be a legal resident
  • Have steady income
  • Have decent credit
  • Prove you can save some money
  • Make a small down payment
  • Complete homeowner classes
  • Help build your home or others’
  • Make payments on time
  • Have an income between specific minimum and maximum limits

How Much Do You Need to Make?

In general, your income has to be significantly below the median income for the area where you live, but not too low. The exact limits also depend on your family size.

For example, to buy a Habitat home around Los Angeles, California, your annual income has to be between $17,450 and $46,500 if you’re single. If you have a family of four you have to make at least $24,900 and up to $66,400.

On the other hand, the upper limit for a family of four in Antigua County, Alabama is just $35,800.

To find out the minimum and maximum income limits where you live, contact one or more of the nearest Habitat for Humanity affiliates.

The Cost of a Habitat Home

What you pay varies by your home’s size and location.

For example, the current average cost for a Habitat home through the Lafayette, Louisiana Habitat for Humanity is $85,000. The North Central Massachusetts affiliate states their homes cost between $100,000 and $120,000.

But you’ll actually save much more than these prices suggest.

These are usually new homes (Habitat also rehabilitates properties), and the Lafayette affiliate website points out that — because Habitat doesn’t make a profit — you’ll typically pay $20,000 less than if you hired a traditional builder. The savings can be much higher in other areas.

In addition, Habitat mortgages are interest-free. The Lafayette Habitat affiliate states “Our homeowners are saving an additional $50,000-$70,000 they would otherwise spend on interest charges over the life of the mortgage.”

Between the savings on construction and interest, you could save up to $90,000, and probably much more in areas where the prices are higher. Of course, you do have to put in some time and effort, which brings us to…

What You Need to Know About Habitat for Humanity Homes

Habitat for Humanity operates around the world. Programs are similar in the U.S. and Canada, with mortgage loans being the norm. In other countries, they operate in various ways. Check Habitat’s international website for a list of Habitat affiliates around the world.

While Habitat for Humanity is a non-denominational Christian organization, they state, “Habitat homeowners are chosen without regard to race, religion or ethnic group, in keeping with U.S. law and with Habitat’s abiding belief that God’s love extends to everyone.”

However, there is quite a bit of variation in how each Habitat for Humanity affiliate operates. Here are some examples.

Required Sweat Equity

You must help build your home or others’ (no experience required), or, if you’re unable to do that, work in a Habitat thrift store or office.

In Los Angeles, you have to contribute at least 200 “sweat equity” hours. In Bozeman, Montana, you’ll have to put in 500 hours.

Your Move-In Date

It can take up to 18 months from the time you apply to the time you move into your new home. In areas where Habitat fixes up homes rather than building new ones, you might move in within a month or two.

The Down Payment

In Glenwood Springs, Colorado, you need to save up $2,000 for your down payment. In Champaign, Illinois, you only need $500.

Mortgage Payments

Habitat of Durham, North Carolina states, “The average monthly mortgage payment for new homebuyers is between $475 and $525.” Because the loans are at zero-interest, most programs have very affordable payments.

Your Credit Score

While the general guidelines say you need decent credit, affiliates make their own rules.

So, for example, if you get a Habitat home in Chilton County, Louisiana, your credit score can be as low as 550. Having a previous bankruptcy is often OK if it’s at least two years old and you’ve paid your bills on time since then.

Debt/Income Ratios

Habitat for Humanity does not want to “help” people get into financial trouble, so affiliates have rules about how much debt you can have to qualify for a home.

For example, in Broward County, Florida, you cannot exceed 40% debt-to-income ratio for all debts, including your house payment.

Income Source

Again, affiliates are free to apply their own guidelines. In general, you just need steady income.

For example, the Twin Cities Habitat affiliate states, “Income sources can include: employment, public assistance of cash, social security, disability, etc.”

Income from a business, child support or a retirement plan is also OK by the Seminole/Apopka, Florida affiliate.

Home Size

Most Habitat affiliates keep their homes to 1,050 square feet or less. In Williamsburg, Virginia, they build homes up to 1,500 square feet.

Cashing in on Your Equity

A Habitat home can really help you get ahead financially.

For example, Habitat’s Peninsula and Greater Williamsburg, Virginia, affiliate states their homes cost about $95,000 total but are worth about $200,000 when completed. Gaining over $100,000 in equity when you move into your home is significant, to say the least.

But can you cash in that equity at some point? Different affiliates have different rules.

For example, the Wake County North Carolina affiliate lets you sell your home anytime, but they have the right to buy it at whatever price you are offered. They lift this and other restrictions once you pay off the mortgage loan.

The Huron County, Ontario, Habitat affiliate puts two mortgage loans on your home. You make payments on the first, which covers the cost of construction.

The second, which is equal to the difference between the cost and the market value when you move in, you pay off only when you sell the home. So you don’t get any “instant equity,” but you can still gain equity from paying down your first mortgage loan and from any rise in home value.

Other affiliates have their own arrangements, so be sure to ask. In any case, you may be able to own a home for less than your current rent, and any equity gains you get over the years are a nice bonus.

The bottom line? If you’re willing to take a few classes on homeownership, do a few hundred hours of work and you meet a few other qualifications, you might be able to get a Habitat for Humanity house with very affordable payments.

Your Turn: Have you ever had a home through Habitat for Humanity? If so, please tell us about your experience.

Steve Gillman is the author of “101 Weird Ways to Make Money” and creator of He’s been a repo-man, walking stick carver, search engine evaluator, house flipper, tram driver, process server, mock juror and roulette croupier, but of more than 100 ways he has made money, writing is his favorite (so far).