Employment and Income Rules for FHA Mortgages
June 11, 2024
When you start thinking about your home loan options, it’s easy to worry about your ability to qualify for a home loan.
When some look at their loan approval potential, they think more about FICO scores than any other aspect of home loan approval. But income and employment count, too. We examine how influential those factors are below.
FHA Home Loan Rules for Qualifying Employment
The first thing to know about the FHA home loan program is that there are requirements for the lender to review the nature of your employment, how long you have been working, and whether your employment meets FHA loan requirements for stability.
An FHA lender is required to verify a minimum of two years of employment. Those two years do not have to be with the same company, but in typical cases, the lender wants to see a full 24 months in the job market.
The FHA Lenders Handbook, HUD 4000.1, says that in cases where the applicant is in a highly skilled profession, the 24-month requirement may be subject to some flexibility, but overall, expect your lender to require two years of job history for loan approval.
If you recently switched the nature of your employment (salary to freelance, for example), you may be required to have a minimum amount of time in the new career before the loan can be approved. Discuss this scenario with a lender as early as possible.
FHA Loan Rules for Qualifying Income
In general, your income must be considered stable and reliable. Predictability is the key in many cases. Your lender may not consider income from certain “side hustle” jobs such as being a reseller on eBay, a vendor on Etsy, or Facebook Marketplace.
Your lender can also not count certain benefit payments as income. The GI Bill, for example, provides a housing stipend for those using it to attend school.
The sticking point is that the benefit is not “likely to continue” because the student is typically entitled to 36 months of the benefit total. The benefit is not “likely to continue” for the long term of your FHA loan.
Rental Income?
Some borrowers want to buy or build a multi-unit home and rent out the unused living spaces to others. This is allowed under FHA loan rules, but if you don’t have any experience as a landlord yet, the lender may not be able to consider potential future rental income as a qualifying factor for the mortgage.
If you have landlord experience, mention this to the lender and ask if future rental income can be considered for loan approval. Your experience may vary depending on the lender but it’s always worth asking.
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RELATED VIDEOS:
Don't Skip the Home Inspection
Bigger is Better With a Jumbo Loan
Insuring Mortgages With the FHA Funding Fee
When some look at their loan approval potential, they think more about FICO scores than any other aspect of home loan approval. But income and employment count, too. We examine how influential those factors are below.
FHA Home Loan Rules for Qualifying Employment
The first thing to know about the FHA home loan program is that there are requirements for the lender to review the nature of your employment, how long you have been working, and whether your employment meets FHA loan requirements for stability.
An FHA lender is required to verify a minimum of two years of employment. Those two years do not have to be with the same company, but in typical cases, the lender wants to see a full 24 months in the job market.
The FHA Lenders Handbook, HUD 4000.1, says that in cases where the applicant is in a highly skilled profession, the 24-month requirement may be subject to some flexibility, but overall, expect your lender to require two years of job history for loan approval.
If you recently switched the nature of your employment (salary to freelance, for example), you may be required to have a minimum amount of time in the new career before the loan can be approved. Discuss this scenario with a lender as early as possible.
FHA Loan Rules for Qualifying Income
In general, your income must be considered stable and reliable. Predictability is the key in many cases. Your lender may not consider income from certain “side hustle” jobs such as being a reseller on eBay, a vendor on Etsy, or Facebook Marketplace.
Your lender can also not count certain benefit payments as income. The GI Bill, for example, provides a housing stipend for those using it to attend school.
The sticking point is that the benefit is not “likely to continue” because the student is typically entitled to 36 months of the benefit total. The benefit is not “likely to continue” for the long term of your FHA loan.
Rental Income?
Some borrowers want to buy or build a multi-unit home and rent out the unused living spaces to others. This is allowed under FHA loan rules, but if you don’t have any experience as a landlord yet, the lender may not be able to consider potential future rental income as a qualifying factor for the mortgage.
If you have landlord experience, mention this to the lender and ask if future rental income can be considered for loan approval. Your experience may vary depending on the lender but it’s always worth asking.
------------------------------
RELATED VIDEOS:
Don't Skip the Home Inspection
Bigger is Better With a Jumbo Loan
Insuring Mortgages With the FHA Funding Fee
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