Last Updated on August 4, 2023 by Eric Jeanette
FHA Loan Income Requirements
Many home buyers ask how much income is needed to purchase a home or to qualify for an FHA loan. The answer will vary based upon many factors including the price of the home, property taxes and other debt on your credit report
FHA does not have income requirements but there is a maximum debt to income ratio of 56.9% which will determine what income is needed to purchase a home.
FHA Loan Income Requirements
The income needed to qualify for an FHA loan will vary for each person. However, FHA guidelines permit a maximum debt to income ratio of 56.9%. This means the proposed mortgage payment, plus any other monthly payments on your credit report cannot exceed 56.9% of your gross monthly income (before taxes). Read more about FHA DTI requirements.
There are variables when determining how much income is needed to qualify for an FHA loan. These variables will be different for each person which is why it is not easy to answer the question of how much income is needed without understanding these variables as well.
- Prevailing Interest Rates – When rates go up, will be able to afford less than when rates are low.
- Property Taxes – Property taxes are included in your mortgage payment and impact your debt to income ratio. Searching for homes in areas where taxes are lower will help you to qualify for a more expensive home.
- Homeowner’s Insurance – Just like property taxes, if your homeowner’s insurance is expensive it will limit how much you can purchase.
- HOA – (Homeowner’s Association Fees) – You are limiting your buying power when purchasing a condo or a home with an HOA fee. After car payments, this is the one thing that really impacts your ability to qualify for the mortgage you need. Seriously consider purchasing a property without an HOA fee.
- Other Debt on Your Credit Report – The lender will look at all other monthly payments and debt on your credit report. The most common items are car payments, student loans, other mortgages, and minimum monthly payments on your credit report. You want to keep all of these payments low before applying for a mortgage.
All of these things combined when weighed the purchase price of the home will determine how much income is needed to qualify for an FHA loan. Also read [FHA Loan Requirements]
We suggest using our home affordability calculator to see how much you could potentially get approved for.
What income does FHA look at?
FHA lenders are required to review all documented income during the approval process.
W2 Wage Earners – You will need to provide your pay stubs for the past 30 days, plus your last two years’ W2s and tax returns.
Self Employed and 1099 – You will need to provide your last two years’ tax returns and/or a P&L statement from your accountant for the current year.
If you earn cash and do not deposit that income in your bank account and claim it on your tax returns, then that income cannot be used.
Does FHA require proof of income?
FHA guidelines requires proof of all income to be used to qualify for an FHA loan. That income also needs to be consistent over the past 1-2 years.
If you are self employed, lenders will look at your income with more scrutiny. For W2 wage earners, your most recent pay stubs and YTD income referenced may be enough to qualify.
How much income do I need for a 200k FHA loan?
To qualify for a 200k FHA loan, you will need income of about $45,000 per year. This assumes your property taxes will be about $3000 per year, the interest rate at 5%, and no other debt on your credit report. This is just an estimate and to know for sure, just complete this form to get prequalified.
Does FHA have an income limit?
There are no income limits for an FHA loan and in fact there are many high income individuals who may need an FHA loan due to having credit scores that are too low to qualify for conventional loans. The bottom line is FHA loans are for everyone, not just low income home buyers. Read (Do FHA Loans Have Income Limits?)
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