Articles Tagged With: FHA Loan Income Rules

January 6, 2016

FHA Home Loan Rules For Employment: Seasonal Work, Family Businesses

In our last blog post we discussed FHA loan rules for employment/income verification for salary, hourly, and part time work. FHA loan rules published in HUD 4000.1 also cover other aspects of income from sources such as family businesses and seasonal work. It might be easy to assume that because a borrower does work that does not last the entire year due to its seasonal nature that a lender might dismiss it–but FHA loan rules anticipate this type of income too, and have specific requirements for lenders to use when considering it for the purposes of a debt-to-income ratio calculation for an FHA mortgage. For seasonal work, FHA loan rules in HUD 4000.1 define the income as follows: “Seasonal Employment refers to employment that is not year round, regardless of | more...

November 13, 2015

FHA Home Loan Income Rules: Disability Income

By Joe Wallace

FHA loan rules in HUD 4000.1 have requirements for the lender to follow when it comes time to verify income. One type of income the lender may need to verify is disability income from SSI, the VA, or private disability benefits. HUD 4000.1 has this to say about this type of income, starting with a basic definition of terms: “Disability Benefits are benefits received from the Social Security Administration (SSA), Department of Veterans Affairs (VA), other public agencies, or a private disability insurance provider.” “The Mortgagee must verify and document the Borrowers receipt of benefits from the SSA, VA, or private disability insurance provider. The Mortgagee must obtain documentation that establishes award benefits to the Borrower.” The timing of such benefits is crucial, as HUD 4000.1 adds, “If any disability | more...

October 16, 2015

FHA Loan Income Questions: Commissions

By Joe Wallace

There are lots of questions about FHA loan income standards–especially where commission income is concerned. Here’s one of the latest reader questions from the comments section, asking about FHA loan income rules for commissions–the reader has a job that “… pays 60% income from salary and 40% from commissions now and am being recruited to another company same industry, same job title and scope of work but better pay. A slight increase in salary and commissions with the new company recruiting me, but same type of ratio 60% salary 40% commissions.” “I have been in the same job title for 2+ year now. Can FHA or an underwriter use my new income with new higher commissions at the new company for a loan? Or do I have to wait for | more...

August 14, 2015

FHA Loan Income Rules: Government Income, Assistance Income, And Military Income

By Joe Wallace

We’ve written elsewhere about the importance of the borrower’s verifiable income when it comes time to fill out an FHA loan application and have the lender review the amount of money coming in versus how much goes out for financial obligations. A borrower’s employment income is very important, but the job you have may not be the sole source of income at application time. For some applicants there may be military income, public assistance or other types of government income for the lender to consider. What are the FHA loan rules for this type of income? Is it allowed at all? The loan rules for the income types mentioned above are found in HUD 4155.1 Chapter Four Section E. We’ll start with military income. Basic pay and allowances are not | more...

What happens to my FHA loan in a natural disaster?

August 14, 2015

FHA Loan Income Rules: Does Alimony/Child Support Count As Income?

By Joe Wallace

For any applicant trying to get an FHA loan to purchase a home, the debt-to-income ratio is very important. How much money you have coming in versus how much you have going out for monthly bills and other financial obligations is a very big part of the lender’s calculations to see whether a borrower can afford the new loan. One area that concerns some is whether alimony/child support is able to be used as part of the borrower’s potential income for those calculations. FHA loan rules currently available in HUD 4155.1 have plenty to say on how and why such income might be used. This type of income can indeed by used, as long as it meets FHA minimum requirements for “effective income” or “verifiable income”: “Alimony, child support, or | more...

March 16, 2015

FHA Loan Income Rules: Projected Verifiable Income

By Joe Wallace

We write a lot about FHA loan income rules. When the lender is processing your FHA loan application, your verifiable income is counted against your monthly financial obligations. The lender must review all sources of your income to determine whether those sources are stable, reliable, and likely to continue for a reasonable period of time. Your job and current income is verified by the lender by way of pay stubs and other documentation. But what happens when a borrower has a pay raise or promotion due later on that could positively change the borrower’s debt to income ratio? Can the lender include such projected income in the equation? The rules covering this issue are found in HUD 4155.1 Chapter Four Section E, which says in part: “Projected or hypothetical income | more...

May 28, 2014

FHA Loan Income Rules: A Reader Question

By Joe Wallace

A reader asks, “Whats the least amount of income for an FHA home loan?” This is a common question, but the real question a borrower should be asking in these cases has more to do with how much money goes out in payment to financial obligations versus how much money is coming in. That is known in lending circles as the debt-to-income ratio. The specific answer to the borrower’s question here is that there is NO minimum income requirement listed in the FHA loan rulebook. “FHA’s mortgage programs do not typically have maximum income limits for qualifying, although you must have sufficient income to qualify for the mortgage payment and other debts.” That’ is a quote from according to a HUD publication titled “100 Questions And Answers About Buying a | more...

May 22, 2014

FHA Loan Rules: Employment

By Joe Wallace

When you apply for an FHA mortgage loan, you’re required to submit a variety of data including your employment history. It’s the FHA loan officer’s job to insure an applicant has sufficient income to afford the loan, and to make sure that income is likely to continue. How does the lender do this? FHA loan rules spell out clearly what’s to be done–HUD 4155.1 Chapter One, Section B explains how it works. To begin: “The lender must obtain the most recent pay stub showing year-to-date earnings of at least one month, and one of the following to verify current employment: • a written VOE verbal verification of employment, or • electronic verification acceptable to FHA.” The pay stub is documentation that the applicant is currently employed. But when it comes | more...

September 22, 2011

FHA Loans and Income Verification: “Future Income”

By Joe Wallace

Borrowers who apply for an FHA home loan are required to list all sources of income on the application. This is required for multiple reasons; the lender must calculate the applicant’s debt-to-income ratio to see if the borrower is able to afford the new mortgage payments if approved for the FHA loan. A borrower who has too much going out and not enough going in won’t qualify for an FHA loan. But there’s another reason for the requirement; an FHA lender is required to verify that the employment and income listed on the FHA loan application is genuine. The lender can’t simply accept on good faith that the data listed on the form is true. When the borrower is notified he or she has been approved for an FHA insured | more...