FHA Disability Income Guidelines
FHA loans are available to all qualifying borrowers including individuals who are receiving disability benefits as their source of income. Purchasing a home or even refinancing with an FHA loan can still be a reality for you even if you are currently on disability.
How to Qualify for an FHA Loan Using Disability Income
The qualification process for disabled individuals when applying for an FHA loan essentially the same regardless as to whether you are earning a salary from your job or whether you are receiving disability benefits.
The only difference is the lender’s verification of your disability income versus how income is traditionally verified using pay stubs and W2’s.
The rest of this article will fully detail the FHA disability income guidelines and explain how to qualify using your disability income. We also recommend reading the following helpful articles which further explain everything you need to know about applying for an FHA loan.
These will apply to you regardless as to whether you are receiving disability benefits.
What is Disability Income?
Disability income benefits are received from the Social Security Administration (SSA), the Department of Veterans affairs (VA), any other government agency or even private disability providers.
This disability income can be used to qualify for an FHA loan provided that the income meets the FHA guidelines.
Disability Income Documentation
The FHA income disability guidelines indicate that the lender will need to verify that you are receiving the benefits and that those disability benefits will likely continue for at least three years.
If there is documentation indicating that the disability income will end within three years, then the income cannot be used to qualify for an FHA loan. However, if there is no documented end date for the disability income, then the lender must assume the disability income will continue beyond three years.
Social Security Disability Income Guidelines
To qualify for an FHA loan using Social Security disability benefits, you must provide a copy of the last “Notice of Award” letter or any other document from the Social Security Administration (SSA) that details your disability benefits. You also must provide at least ONE of the following documents:
- Tax Returns showing a history of receiving the benefits
- A recent bank showing deposits of your disability benefits
- A copy of the budget letter or benefits letter from the SSA
- A copy of the SSA 1099.1042S form
Providing at least one of these documents should be fairly easy for most FHA mortgage applicants. If you have any questions, your FHA lender should be able to guide you as they are fully educated on the FHA disability income guidelines.
Private Disability Income Guidelines
It is possible that you are receiving private disability income from an insurance provider, your employer, or another private non-government entity. This income may also be used to qualify for an FHA loan.
You will need to provide documentation and verification of these disability income benefits and that they are likely to continue for at least three years.
You will also have to provide ONE of the following to the lender during the loan application process:
- A copy of your most recent tax returns
- A copy of your most recent bank statement showing a deposit of your disability income benefits
Although the tax returns must be provided anyway when applying for an FHA loan, it is possible that your disability is recent and therefore those benefits may not appear on your most recent tax returns.
It is for this reason why a copy of your bank statement (which oddly enough also must be provided for a typical FHA loan application) must also be provided.
Temporary Disability Guidelines
If you have a temporary disability, the FHA lender can use your regular income versus the disability income on your loan application for qualification purposes. The lender would have to verify the following:
- The borrower intends to return to work
- The borrower has the right to return to work
- The borrower qualifies for the mortgage despite any reduction of income resulting from the disability
If the borrower is scheduled to return to work before the first mortgage payment would be due, then the loan application can be processed as if the absence of work due to the disability has not occurred.
Lenders are not permitted to discriminate against a borrower who has a disability. Discrimination is also not permitted for race, color, age, sexual orientation, religion, or national origin.
Lenders are also not permitted to inquire or request documentation about the nature of your disability. How you became disabled as well as the type of disability you have is irrelevant and cannot be used in any way in determining whether you will be approved for an FHA loan.
What is the best mortgage for people on disability?
The best mortgage for someone on disability will vary depending upon your unique situation and loan scenario. First, the mortgage program needs to accept disability income. Most conventional and government mortgages will allow disability income.
Finally, factors such as your down payment funds and credit scores will likely be the two things that will determine which mortgage is best for you.
Are there disability home loan grants?
There are disability home loan grants available and although grants are not available through your lender, our FHA lenders can help to refer you to an agency that offers disability grants.
Can You Get an FHA Loan on Social Security?
Social security income can be used to qualify for a home loan. Virtually all loan programs accept social security income whether you are retired or disabled. If the social security income can be documented, then you an use it to apply for a mortgage.
Qualifying for an FHA Loan with Medical Collections – Do not let medical collections stop you from buying a home. This article explains how you can still get approved for an FHA loan with medical collections.
Qualifying for an FHA Loan with 1099 Income – There are provisions in the FHA guidelines to help those who earn 1099 income to qualify for a mortgage.