November 9, 2020
FHA loans, like all mortgage loans, have rules governing the borrower’s income. Your lender is required to verify your income to make sure it is stable and reliable.
The lender is also required to ensure you have a minimum amount of job experience; a year or less is not enough for your total amount of time in the job market.
What do you need to know about FHA loan income rules? There are a few important factors.
For example, if you have been working a job where you are paid a salary and you are switched to commission income, your lender will require a minimum amount of time earning the new type of income (commissions) before it may be counted to qualify for the new loan.
There are also rules that impose similar restrictions if you have recently switched to being a self-employed borrower. You’ll have to earn the self-employed income for a minimum amount of time.
Why? There are FHA minimums and lender standards which may not always be the same–ask your loan officer about that bank’s requirements.
Some borrowers want to know if they can use a housing stipend paid via the Post 9/11 GI Bill as qualifying income. But FHA loan rules say no to this. Do you know why?
FHA Loan rules require the income to be stable and reliable, which the GI Bill housing payments are. But the rules ALSO require those funds to be “likely to continue” and GI Bill housing stipends are NOT. They are only paid when the student is actually attending school–no housing money for summer break, Christmas break, etc.
There is a built-in expiration for GI Bill housing funds, which is whenever the student’s entitlement has been used up–the money is not available indefinitely.
The same is true for unemployment checks. You cannot use unemployment payments to qualify for an FHA mortgage loan since unemployment also has an expiration for the recipient. Your unemployment funds will not last indefinitely and can’t be used to qualify.
Borrowers who worry about their income situation may do well to consider a co-borrower.
Talk to a loan officer about this option if you have questions or concerns. Loans with non-occupying co-borrowers may have different requirements than for those who are applying for mortgages with a co-borrower who will live in the home. Be sure to ask about the differences between FHA mortgages with occupying and non-occupying co-borrowers.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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