May 18, 2011
First-time home buyers looking to a home to purchase with an FHA guaranteed loan have many questions about the program and how it works. One of the first questions is, “Am I eligible for an FHA home loan?”
One reason for this question is because FHA loans are sometimes misunderstood, especially when it comes to income requirements. Contrary to what some mistakenly believe, there are no income maximums for FHA loans. Some programs associated with down payment assistance or secondary financing may impose income ranges, but for a basic FHA home loan application, you cannot make “too much money” to qualify.
The FHA does require borrowers have enough income to qualify for mortgage payments, and income is carefully scrutinized along with a borrower’s amount of existing debt. A borrower who does not make enough to pay their current debts plus the additional responsibility of an FHA mortgage won’t be approved for an FHA insured home loan.
Contrary to what some may believe, the FHA does not discriminate against self-employed borrowers or small business owners. The application and approval process for an FHA loan may be different for self employed, small business owners or seasonal workers, but there is an established way for these FHA loan applicants to apply and be approved for a home loan.
To be approved for an FHA home loan, the applicant must have a social security number and what the FHA describes as “lawful residency in the United States.” An FHA borrower must be of legal age and able to sign a contract according to state laws. The legal age to do this may vary from state to state–the laws of the state where the purchase is taking place usually apply in such cases.
FHA loans are approved on a case-by-case basis. Just because a borrower has a good credit rating, job history and other qualifying circumstances does not automatically mean the FHA will approve the loan. Along the same lines, just because a potential borrower has made credit mistakes in the past does not mean they will be automatically rejected for an FHA insured loan.
The FHA official site states, “Using FHA guidelines, lenders will make a credit determination based on the merits of each case. To find out if you qualify, and how much you can borrow based on your income and debts, you should contact a FHA approved lender.”
For those with a history of credit issues, trouble, or even bankruptcy, the FHA generally looks for a record of on-time, reliable payments and employment for at least 12 months leading up to the FHA credit application. Borrowers are encouraged to start preparing early for an FHA loan, checking credit scores and resolving outstanding issues in the year leading up to the credit application.
More FHA Loan information is available from the Department of Housing and Urban Development at http://portal.hud.gov/portal/page/portal/HUD/topics/buying_a_home
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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