Are There Income Requirements for an FHA Mortgage?
But FHA loans are not specifically designed for a single type of borrower. All who financially qualify based on FHA loan minimums and lender standards are welcome to apply for an FHA mortgage loan, refinance loan, reverse mortgage, etc.
Since the FHA loan rulebook, HUD 4000.1, specifies no minimum income requirement for an FHA mortgage, there will be no upper limit or ceiling of income. FHA loans are designed with more lenient FICO score minimum requirements than some other kinds of loans, but that has nothing to do with the amount of your annual income or how you earn that income.
Lender standards will also apply in addition to FHA loan minimums, so consult with a loan officer to see what FICO score requirements may apply. You will discover there ARE standards for income when it comes to FHA mortgages, but these standards do not include the actual dollar amount of an applicant’s pay.
Instead, the lender wants to know how much of your income is taken up by existing financial obligations, that your employment and income is stable and that it will continue into the future.
This applies to all different kinds of work up to and including seasonal employment. In those cases the lender must verify that the seasonal work is something you do each season rather than a one-off job. It may also include freelance employment.
In these cases your loan officer must verify that the applicant’s freelance work is dependable from year to year. Commission income and even part-time employment may also count if it meets FHA loan standards.
The lender will verify such employment and income using data from your income tax returns, business plans (for self-employed applicants), history of commission payments and other documentation may be required on a case-by-case basis depending on the nature of your work.
Again, lenders are not as concerned with how much you earn, but more about whether you can afford the mortgage payments given your current income compared to your outgoing debt. The lender will measure your debt-to-income ratio and apply FHA and lender standards to determine whether you can afford the home loan. FICO scores and other financial qualifications will be important in this area.
Generally speaking the FHA loan minimums found in HUD 4000.1 require borrowers who are eligible for maximum financing (with a 3.5% down payment) to have no more than 43% of their monthly income be taken up by outgoing financial obligations including the projected mortgage loan payment. Those who exceed this ratio may be required to have compensating factors such as a larger down payment, cash reserves, etc.
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