What Will Disqualify You from Getting an FHA Loan?
April 7, 2024
The question, “What will disqualify you from an FHA loan” is raised so much online that Google includes it in their “People Also Ask” section when you search for FHA loan topics.
Some Disqualifiers
One source for answers in this area notes that low FICO scores are one culprit. Another is having too much monthly debt.
Yet another reason you could miss out on an FHA mortgage according to this source? Insufficient funds.
While that (in terms of being a disqualifier) may be subject to a bit of interpretation, the gist is correct in the sense that borrowers must be able to pay the closing costs of the loan, as well as the down payment.
Some costs may be financed, but if a borrower can’t come up with a down payment on their own, they must either get a friend, family member, or employer to provide gift funds, or they must apply for a local downpayment assistance program where available.
Other Issues to Know
Down payment funds are just one issue. What else can disqualify you from being approved for an FHA mortgage?
If the home can’t pass the appraisal or if the home can’t be repaired to pass an appraisal, this could result in the lender denying the loan.
The same is true if the home is located too close to high voltage power lines, oil or gas drilling operations, or in certain natural disaster hazard zones.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
FHA Loan Approval Issues
If you haven’t been working for at least two years, or if you have recently changed from one type of employment to another (freelance from full-time, for example) you may have to be earning your income for a minimum amount of time before the lender can consider that as qualifying income for the loan.
The good news in this department is that there is no monthly minimum income requirement. You won’t be held to a dollar amount as a condition of loan approval.
It’s more important that your monthly income is not taken up by too much outgoing debt. The ratio of your income compared to your current debt is the key factor here.
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Some Disqualifiers
One source for answers in this area notes that low FICO scores are one culprit. Another is having too much monthly debt.
Yet another reason you could miss out on an FHA mortgage according to this source? Insufficient funds.
While that (in terms of being a disqualifier) may be subject to a bit of interpretation, the gist is correct in the sense that borrowers must be able to pay the closing costs of the loan, as well as the down payment.
Some costs may be financed, but if a borrower can’t come up with a down payment on their own, they must either get a friend, family member, or employer to provide gift funds, or they must apply for a local downpayment assistance program where available.
Other Issues to Know
Down payment funds are just one issue. What else can disqualify you from being approved for an FHA mortgage?
If the home can’t pass the appraisal or if the home can’t be repaired to pass an appraisal, this could result in the lender denying the loan.
The same is true if the home is located too close to high voltage power lines, oil or gas drilling operations, or in certain natural disaster hazard zones.
You may be denied for an FHA loan if you have declared bankruptcy but you have not had the bankruptcy discharged. You may be denied if you are delinquent on federal taxes or otherwise owe money to the federal government but without an approved payment plan.
FHA Loan Approval Issues
If you haven’t been working for at least two years, or if you have recently changed from one type of employment to another (freelance from full-time, for example) you may have to be earning your income for a minimum amount of time before the lender can consider that as qualifying income for the loan.
The good news in this department is that there is no monthly minimum income requirement. You won’t be held to a dollar amount as a condition of loan approval.
It’s more important that your monthly income is not taken up by too much outgoing debt. The ratio of your income compared to your current debt is the key factor here.
------------------------------
RELATED VIDEOS:
Let's Talk About Home Equity
Understanding Your Loan Term
A Few Words About Bankruptcy
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