FHA Loan Articles
News, updates, and explanations to keep you informed.
Are There Minimum Income Requirements to Get a Mortgage?
One frequently asked question about FHA home loans is whether there are minimum income requirements for suburban home purchases or FHA condo loans.
The FHA does not place a dollar amount requirement on income or specify a range of minimum income amounts, but FHA requirements do impose standards with regard to verifiable income--those standards must be met in order to qualify for the FHA mortgage loan.
FHA loan rules for income more to do with stability of income, the ratio of monthly financial obligations compared to that income, and the reliability of the paychecks rather than scrutinizing the amount itself.
Participating FHA lenders are required to do the math to calculate whether the borrower can afford to pay his or her monthly FHA mortgage when combined with the rest of the loan applicant's obligations.
FHA rules say, "The lender must analyze the income of each borrower who will be obligated for the mortgage debt to determine whether the borrower's income level can be reasonably expected to continue through at least the first three years of the mortgage loan."
The FHA official site adds, "In most cases, a borrower's income is limited to salaries or wages. Income from other sources can be considered as effective, if properly verified and documented by the lender."
Many variables on effective income can be used to qualify. Consider the issues of retirement income, federal benefits, or government assistance. "Effective income for a borrower planning to retire during the first three-year period must include the amount of
-- documented retirement benefits
-- Social Security payments, or
-- other payments expected to be received in retirement."
FHA loan rules for income verification are designed to be flexible without compromising standards for measuring the reliability of effective income. But there are also restrictions on the lender.
Income that cannot be verified or isn't considered stable is not allowable for the purposes of calculating debt-to-income ratios. Special attention must be given to income listed as employee bonuses or overtime pay--these forms of income may not be counted for FHA loan purposes unless it qualifies under FHA guidelines.
"Overtime and bonus income can be used to qualify the borrower if he/she has received this income for the past two years, and it will likely continue. If the employment verification states that the overtime and bonus income is unlikely to continue, it may not be used in qualifying. "
FHA NEWS and RELATED ARTICLES
One type of question that sometimes arises about FHA loans-- Is there a no-credit-check version of an FHA mortgage loan? What is the criteria required for FHA loans that do not require a credit check and/or appraisal?
One not-so-common question about FHA loans still comes up often enough to discuss in detail. Some FHA loan applicants want to know if they can purchase a residence from another family member using an FHA insured mortgage.
Except for obligations specifically excluded by state law, the debts of the non-purchasing spouse must be included in the borrower’s qualifying ratios if certain conditions are met.
Some FHA borrowers have questions about applying for an FHA loan after experiencing a short sale on a previous home. The FHA loan rules found in HUD 4155.1 have the answers for borrowers applying for an FHA mortgage after a short sale.
The FHA and HUD issued new rules for mortgage insurance designed to add fiscal security to the loan program, and when those rule changed the new guidelines were published in Mortgagee Letter 2013-04.