July 22, 2013
A reader asks, “Why is there no website that shows you what income qualification rules might apply for an FHA loan ? Is there a maximum income allowed for a first-time, unmarried, home buyer?”
There’s a simple reason where there is no website that details income qualification rules for FHA home loans when it comes to maximum loan amounts, first-time home buyer preferences and whether marital status itself affects an FHA home loan application: these are generally not factors.
That’s NOT to say that your marital status or income might not affect your FHA loan. Far from it. Married borrowers applying for a loan together may have a better chance based on income factors and other aspects than a single borrower. (Two applicants applying together may also have its share of liabilities if one applicant has weaker credit than the other, but that’s a topic for another blog post.)
This reader question brings us back to a couple of common misconceptions about the FHA home loan program. There is no minimum or maximum income dollar amount. Instead, the FHA requires the income you bring to the bargaining table to be verified as stable and reliable, and it requires the borrower to have a certain debt-t0-income ratio in order to qualify for the loan.
If the lender determines your debt-to-income ratio is too high, it would be determined that the borrower cannot afford the FHA home loan. High debt ratios may be offset by what are called “compensating factors” such as substantial cash reserves or larger down payments, but this would have to be discussed with the lender.
When it comes to “first time home buyer” preferences, there are none in the FHA loan rules. A lender might have a program unique to that financial institution, or you might find a state or local first time homebuyer assistance program, but the FHA loan rules themselves are not designed to offer preferences to first-time house hunters.
And finally, there is no such thing as a “maximum income” for FHA home loans. That would imply that FHA mortgages are somehow targeted at lower-income borrowers, but the fact is that FHA loans are available to all financially qualified applicants. There’s no cap on how much a borrower can earn before he or she is “disqualified from applying” for an FHA mortgage loan.
Do you have questions about FHA home loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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