October 18, 2016
A reader asks, “I am a working part time. My annual income is 14,400. I work only 8 hrs a week. I have a savings of $30000. Will I be eligible to get a house loan of $76000? I have a very good credit score. I am working in the current place for past 8 months. I had a full time job before.”
FHA loan rules do not specify a minimum or maximum income that makes a borrower eligible for an FHA mortgage loan. What the loan rules DO require is that the income a borrower has be verifiable, reliable, and likely to continue. The lender will have to make a judgment call on whether the borrower’s income meets this criteria.
Another important factor in FHA loan approval is the borrower’s debt-to-income ratio.
A borrower may have the necessary income to be approved for the loan, but if the debt ratio is too high and there’s more money going out for monthly financial obligations than FHA loan standards (and/or lender standards) permit, loan approval may not happen.
A borrower who has “compensating factors” may be able to offset certain issues that work against the borrower when the lender is examining these issues. For example, offering to make a larger down payment can help, though in some cases (especially where FICO scores are concerned) a borrower may be required to make that larger down payment as a condition of loan approval.
Another compensating factor-one that seems to be present for this reader-is what the FHA terms “substantial cash reserves”. The reader seems to have close to half of the price tag of the home in cash or available to be converted into cash (such as with investments, stocks or bonds, etc). That may count in an applicant’s favor if other factors are “marginal” based on lenders standards and FHA mortgage loan rules.
It is very important to remember that lender standards do make a difference and that FHA loan rules aren’t the only ones that will factor in when it comes to loan approval.
What may be acceptable at one financial institution may not be permitted at another, which is why it’s important to have a conversation with a loan officer about your specific needs in cases like these.
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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