What is Section 8 housing?

If you need help affording rent, you may qualify for housing assistance through Section 8. Officially known as the Housing Choice Voucher Program, Section 8 helps low-income households who meet specific requirements pay rent. Section 8 can also help eligible low-income people and households afford to buy a home and pay their monthly mortgage through homeownership vouchers.

Learning more about how Section 8 housing programs work will help you understand if you qualify for assistance in paying rent or buying a house.

What is Section 8 housing?

Section 8 of the Housing Act of 1937 provides government assistance to help low-income, disabled, and senior citizens pay rent for safe, sanitary shelter. While commonly known as Section 8, this assistance is officially provided by the Housing Choice Voucher Program.

Section 8 is the most extensive rental assistance program in the United States. Understanding key aspects of Section 8 housing programs can help you determine whether you meet the criteria.

Key features of the program include:

• Vouchers that help low-income families afford monthly rent. The U.S. Department of Housing and Urban Development (HUD) oversees and funds the assistance program.
• You'll apply through your local housing authority, which administers the program at the local level. Authorities are often divided by county.
• The public housing agency determines eligibility for the program based on family size and annual gross income, which can’t exceed 50% of the median area income to qualify.
• By law, 75% of vouchers must be awarded to families with household incomes below 30% of the area median income.
• You can check your area median income through Fannie Mae's lookup tool.

If you qualify for Section 8 housing, you’re required to allocate 30% of your adjusted monthly gross income to rent and utilities. The remaining 70% is paid directly to your landlord by the public housing agency managing that family’s voucher.

Section 8 housing quality requirements

Any residence you choose for Section 8 housing must meet HUD eligibility standards. All residences must meet specific requirements to pass these standards:

• Cleanliness
• Working kitchen area
• Sanitary bathrooms
• Working lights and electricity
• Water availability
• High air quality
• Working smoke detectors
• Sound structure and materials

Plus, the rent must be comparable to that of other units in the area. The unit's size must be appropriate for the number of members in your family.

If you’re not sure whether the residence you chose meets these requirements, your public housing agency can help you figure it out.

Section 8 eligibility requirements

Now, let's take a closer look at the main eligibility requirements for Section 8. You can find the complete requirements on the HUD website:

• Income. To qualify for Section 8 housing, your gross annual income can’t exceed 50% of the area’s median income. You’re expected to put 30% of your monthly adjusted gross income toward rent and utilities. HUD has an online tool that can help you determine whether you qualify for Section 8.
• Citizenship. To prove your identity and citizenship status, you must include the following information on the Section 8 application.
  • Name
  • Date of birth
  • Social Security number
  • Annual gross income
  • Mailing address
• Criminal history. Next, participants must provide some background information about any criminal record. Having a record doesn't automatically prevent you from qualifying, but anyone listed on a sex offender registry won't be eligible.
• Eviction history. Program officials will review your previous rental history to ensure you were a reliable and responsible tenant. They're primarily looking for evictions, with a particular focus on whether they were crime-related. You’ll most likely be denied Section 8 assistance if you’ve ever been evicted from a rental property.

Once you complete your application and you're approved, you'll be placed on a waiting list. Even if you qualify, there's a good chance you'll be rejected due to the program's high demand.

Using Section 8 to buy a house

As a part of Section 8, the housing choice voucher can often be used to pay for homeownership costs. To qualify, you must:

• Be a first-time homeowner
• Take housing counseling
• Meet the minimum income requirements

If you qualify and complete the process, you can use your subsidy to cover part of your monthly mortgage payment for years to come.

Not all public housing agencies offer an HCV homeownership program. If yours does, reach out to find out more about qualifying to buy a house with these vouchers in your area.

If your local public housing agency doesn't offer this program, consider calling to request that the office participate.

• To use the voucher to buy a home, you must already be a part of the housing choice voucher program.
• You must meet income limits to qualify for a voucher.
• Depending on where you live, there might be waiting lists or "open seasons" to apply for a voucher.
• The assistance is based on standard moderate housing costs in your area. The public housing agency will subtract 30% of your adjusted gross monthly income from that amount, and the result is your assistance amount. You can use the amount to pay your mortgage principal and interest, property taxes, homeowners insurance, and utilities.
• Vouchers last for up to 15 years, or 10 years if you have a shorter loan term.
• The HUD provides $1,500 to use for closing costs.
• Clauses need to be added to the purchase and sale agreement, such as a prepurchase inspection, and the buyer isn't required to pay for prepurchase repairs.
• Two inspections are required: a housing quality standards inspection conducted by the public housing authority, and an independent home inspection.
• To qualify, you'll need to meet the income and credit requirements. Then, you'll need to see what housing is available in an area.                                                                                                                                                                    

What’s the difference between Section 8 and HUD housing?

Some people confuse Section 8 housing with HUD housing, but these are different programs.

A HUD home is a foreclosed property that was financed with an FHA loan. Since the FHA backed the loan, it takes ownership of the property after foreclosure. In selling these homes, HUD prefers selling to owner-occupants, nonprofits, and government agencies rather than to investors. The homes also may be offered at prices below market value and allow buyers to use home buying assistance programs.

One key difference between HUD homes and buying a home with Section 8 assistance is the types of housing available. Let's look at some of the other differences:

Buying a house through Section 8: Pros and cons to consider

If you're thinking about buying a house with Section 8 assistance, you'll want to consider both the advantages and downsides:

Pros

• Your housing expense requirement is low. The program requires participants to put 30% of their adjusted monthly income toward housing expenses.
• You’ll have more access to properties. Depending on where you live, you may have access to better homes than you could find as a renter.
• You’ll have help from the public housing agency. Your local public housing agency will assist you through the home buying process.

Cons

• Your voucher will expire. Voucher support will end after 15 years – 10 years if your mortgage repayment term is less than 20 years.
• You could have a long wait. Due to the high demand for Section 8 housing, it could take a while for you to qualify for a voucher. In some areas, you can be on the wait list for years.

How to apply for Section 8 housing

Here are the steps you'll want to follow to apply for Section 8 housing:

Step 1: Seek out your local housing authority

The first step is identifying your local housing authority. You can find your local public housing agency by state, city, and ZIP code.

Step 2: Determine your eligibility

Next, you’ll work with your local public housing agency to figure out your eligibility for Section 8 housing. Eligibility is based primarily on your family size and annual gross income. As a general requirement, your income can’t exceed 50% of the median income in your area.

A local public housing agency may sometimes give preference to specific individuals for housing assistance. For instance, local residents or those dealing with homelessness or a disability may receive preferential treatment. If you qualify, be sure to let the public housing agency know so you can shorten your waiting time as much as possible.

Step 3: Fill out the application

If you qualify for Section 8 housing, you’ll need to fill out the program application. The application is free and available online and by mail. You’ll need to provide information about your income, citizenship, criminal history, and eviction history.

Step 4: Confirm your waiting list status

Once you've submitted your application, you'll find out your status on the waiting list. If you live in an area with a high demand for Section 8 housing, you could wait years. Once your application is processed, you can confirm your waiting list status through an online portal.

Step 5: Find affordable housing

Finally, once you receive your voucher, you can begin looking for affordable housing. You have 60 days from the date you receive your voucher to use it. Look for rental housing that accepts Section 8 housing vouchers and meets the program requirements.

Once you’ve chosen a home, you’ll sign a minimum 1-year lease with your landlord and may be required to put down a security deposit. You can expect to pay 30% of your monthly income toward rent, and the public housing agency will pay the remainder directly to your landlord.

If you decide to move after a year, you can do so without interrupting your Section 8 voucher benefits. But you must let the public housing agency know in advance, and your new residence must meet HUD housing requirements.

The bottom line: Buying a house with Section 8 funds is a possibility

If you're low-income, disabled, elderly, and want an affordable housing option, buying a home with Section 8 funds or HUD housing can make it feasible.

While there are lower income and credit requirements, it's important to be aware of the pluses and downsides. And getting your head around the steps involved in applying and getting qualified can make for a smoother, hassle-free process.

To explore your options, consider applying for a mortgage online with Rocket Mortgage.

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