March 28, 2014
One of the most common questions we get about FHA home loans involves the borrower’s basic eligibility for the FHA loan program based on receiving government assistance or other types of government payments including:
• military income
• VA benefits
• government assistance programs
• mortgage credit certificates
• Section 8 home ownership vouchers
What do FHA loan rules say about these types of income? Can they be used to qualify for an FHA mortgage? Not all these types of payments are covered under one blanket rule. The different types of pay have different rules. For example, when it comes to military allowances above and beyond base pay, HUD 4155.1 Chapter Four says:
“Military personnel receive base pay, and are often entitled to additional forms of pay, such as
• variable housing allowances
• clothing allowances
• flight or hazard pay
• rations, and
• proficiency pay.
These types of additional pay are acceptable…as long as the probability of such pay to continue is verified in writing.”
VA benefits have their own special rules. Chapter Four:
“Direct compensation for service-related disabilities from the Department of Veterans Affairs (VA) is acceptable income for qualifying, provided the lender receives documentation from the VA. Education benefits used to offset education expenses are not acceptable.”
Potential FHA borrowers on government assistance programs also have a special set of guidelines which cover that type of income:
“Income received from government assistance programs is acceptable for qualifying, as long as the paying agency provides documentation indicating that the income is expected to continue for at least three years. If the income will not be received for at least three years, it may be considered as a compensating factor. Unemployment income must be documented for two years, and there must be reasonable assurance that this income will continue. This requirement may apply to seasonal employment.”
As you can see, each different situation and type of income requires a different type of regulation to address those specific programs. We’ll address the FHA rules for Section 8 vouchers and mortgage credit in a future blog post.
Do you have questions about FHA home loans? Ask us in the comments section. You can apply or get pre-approved for an FHA loan at FHA.com, a private company and not a government website.
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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