May 2, 2023
Do you qualify for an FHA home loan as a first-time home buyer? You can check several things to see whether your credit and employment situations will allow a lender to justify approving your mortgage loan application.
Buying real estate means making a significant investment; potential borrowers who are not financially ready for this investment should take their time, prepare for it, and commit when they are fully prepared.
What does it take to get an FHA home loan approved?
If you are considering applying for an FHA home loan without at least two years of work history, it may be a wise idea to delay your application until you have at least 24 months of work on your record.
There may be some exceptions to the 24-month rule, but at a minimum, you’ll need a year in the workforce to be a serious candidate for an FHA mortgage.
Anything less than one year does not allow the lender to justify your loan under FHA home loan rules, and you will need to talk to your loan officer to see what financial institution rules may apply above and beyond FHA program requirements
You do not have to have two years with the same employer, but the longer you have worked with your current employer, the more favorably a lender may look on your work record.
If you are earning commission income, the lender will require you to have a minimum amount of time spent earning that income-the record of your earnings will tell the lender plenty about whether or not to approve the loan.
Commission income can be considered stable and reliable income (an FHA loan program requirement) but it takes a sufficient amount of payment history to establish the pattern of earnings in such cases.
This is also true of self-employed borrowers who must show a pattern of small business ownership or self-employment that demonstrates their income is sufficiently stable.
Acceptable Debt Ratios
If your financial obligations take up 40 percent of your income or more, work on lowering that number for the best results. Don’t assume that your debt is not a factor in loan approval-it definitely can be.
If you are applying for an FHA home loan and do not know the lender’s FICO score requirements, policies on credit score ranges, and overall loan approval guidelines, you should find out BEFORE completing an application.
Speak to a loan officer to learn more about the requirements in these areas; it can save you a great deal of time knowing the expectations going in.