November 1, 2017
What do I need to get FHA loan approval? There are several areas that will factor into the lender’s decision to approve the loan, including credit history, time spent working overall, and the dependability of your income.
In addition to your credit, employment, and other issues, the property itself must meet FHA loan standards. As you can tell, the issue of FHA loan approval is one that requires some planning and research for you as well as the lender.
FHA Loan Approval Is Based On Financial Qualifications
Where the borrower herself is concerned, getting an FHA loan approval hinges on three basic things. One is your current ability to afford the loan. Another is your past credit activity and your record as a good credit risk. And the third area involves your ability to afford your mortgage payments in the future.
What Are The Financial Qualifications For An FHA Loan?
Borrowers must meet both the FHA minimum FICO score (580 or better for maximum financing) requirements and any additional credit score standards at the participating lender’s financial institution. 12 months of on-time payments for all financial obligations prior to the loan application are also important.
Borrowers should know they do not have any set dollar amount minimum or maximums for income to meet to get FHA loan approval, but the applicant’s debt-to-income ratio will be examined. Your current income is compared to your monthly bills to see how much of that income is already spoken for by your financial obligations.
What About Employment?
FHA loan rules were designed with the idea that there’s no one-size-fits-all employment situation to use as a standard for loan approval. Some applicants are seasonal workers, some are commissioned employees who don’t get a salary, others are self-employed or freelance.
The standard used by the FHA and your lender will include determining how stable and reliable your employment is, how long you’ve been working, and whether your new job (where applicable) is upwardly mobile and could help you better afford your home loan. Different types of careers (self employment, contract work, etc) will require different documentation so lender can make an informed choice to approve the loan.
How Long Do I Have To Work Before I Am Eligible For An FHA Loan?
The lender is required by FHA rules to verify the most recent two years of employment. That does not always mean you have to work for the same company for those two years, the lender just wants to see your record of employment has lasted at least 24 months. Additional lender standards may apply.
Unusual Circumstances
Some borrowers have gaps in income or employment, adverse credit actions in their past, and other factors. None of these things automatically spells the end of a home loan application-the lender is tasked with determining whether such things were circumstantial or the result of a genuine disregard for good credit practices.
You may be asked to provide supporting documentation or other things to assist the lender in making a determination about FHA loan approval. It’s never safe to assume you cannot get an FHA loan without discussing your circumstances with a loan officer first.
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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