April 23, 2015
A reader asks, “Where I can find the income limits on FHA loans, if customer is buying for the first time?”
This reader question implies two misconceptions about FHA home loans. The first is that there is a preference, advantage, or other special treatment given to first time FHA loan applicants or first-time home buyers. This is not true insofar as the FHA single-family home loan program itself is concerned.
It’s true that there may be state or local programs in the borrower’s zip area that might be available to help first time home buyers. It may also be true that some financial institutions offer first time home buyer programs. But the FHA loan process itself shows no preference, gives no special benefits to a borrower who has never applied or purchased before. That’s a common misconception.
The other myth implied by this reader’s question is that there is an income limitation for FHA home loans. This is also not true. FHA loan rules specify no minimum or maximum income requirement. Instead, a borrower’s ability to afford the mortgage loan is evaluated based on the applicant’s debt-to-income ratio, his or her repayment history on financial obligations, job and income verification, etc.
A borrower cannot earn “too much” to qualify for an FHA loan, nor can a borrower earn “too little”. A borrower CAN be denied an FHA loan if the amount of monthly debt exceeds a certain percentage of the verifiable income brought in. But in terms of a specific dollar amount per month or per year, this is not the standard FHA loans are approved or denied upon.
There ARE FHA loan limits–a specific amount of money determined by zip code that the FHA will guarantee. That is not a “hard” ceiling–the lender may be willing to offer you more money in an FHA loan (based on the appraised value or sales price of the home, whichever is lower) but the amount of money above the FHA loan limit will not be guaranteed by the FHA and you may be required to make a larger down payment in such cases. Other rules and requirements may also apply in such cases and all borrowers are required to financially qualify for such larger loans.
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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