September 24, 2020

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FHA Home Loans: How Much Income Do You Need To Qualify?

Thinking about buying your first home?

Many future home owners want to know about the income requirements for an FHA loan–are you worried that you won’t qualify for an FHA mortgage because you don’t earn enough each month?

And then there’s the opposite problem–a misconception that you can earn “too much” to qualify for an FHA mortgage as though this program had income limits. FHA loans do NOT feature income limits and this program does not require you to qualify based on financial need.

FHA Loans Are For All Financially Qualified Applicants

There is no minimum income requirement for an FHA mortgage, and there is no upper limit or income “ceiling”. FHA loans are not targeted for any one income bracket.

FHA loans are designed with more lenient FICO score minimums in mind, but that has nothing to do with the amount of your annual income or how you earn that income. These mortgages are not for one specific type of borrower–you can be a low-income borrower, a high-income borrower, or somewhere in between.

FHA Loan Income Requirements You Need To Know

There ARE FHA loan standards for income, but they do not address the amount of your salary. Instead, the lender wants to know that your income is dependable and that it will continue.

This applies to all different kinds of work. It could range from seasonal employment, work on commission, or contract work. In those cases the lender will want to see that your work is dependable from year to year.

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.

How Much Do I Need To Earn To Qualify For An FHA Mortgage?

As mentioned above, this is not about 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 (see below) to see if you can realistically afford the mortgage based on the ratio.

What Is The Required Debt-To-Income Ratio (DTI)?

In general (and lender standards will also apply) FHA loan minimums technically require those eligible for maximum financing have no more than a certain percentage of their monthly income be taken up by outgoing financial obligations. There are two calculations–one includes housing expenses, the other does not.

In 2019, for example, the FHA loan debt ratio requires no more than 43% of monthly income to be taken up by your total monthly expenses including housing. FHA regulations are subject to change, so if you need DTI information for the current year, ask a participating lender.

Lenders may be able to approve a mortgage with compensating factors like a bigger down payment but the best advice is to work on your debt ratio as early as possible–get your debts as low as you can before you apply for the mortgage for best results.

Joe Wallace - Staff Writer

By Joe Wallace

August 28, 2020

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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FHANewsBlog.com was launched in 2010 by seasoned mortgage professionals wanting to educate homebuyers about the guidelines for FHA insured mortgage loans. Popular FHA topics include credit requirements, FHA loan limits, mortgage insurance premiums, closing costs and many more. The authors have written thousands of blogs specific to FHA mortgages and the site has substantially increased readership over the years and has become known for its “FHA News and Views”.

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