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 guidelines require all income to be consistent, stable, fully documented, and have a maximum debt to income ratio of 56.9%.
Does FHA require proof of income?
FHA guidelines requires verification and documentation of all income when applying 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.
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. Only the fully documented income can be used on the application.
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.
Other Types of Income That Can be Used for an FHA Loan
The income used for an FHA Loan is not just W2 or self employed income for business owners. This list below is just an example of other types of income that can be used:
- Real estate or rental income
- Income from stock portfolios
- Pensions
- Retirement income
- Social security income
- Disability income
- Annuities
- Alimony
- Child support income
- Commission income if consistent
- Earnings from tips if documented on tax returns for the past two years
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?)
Frequently Asked Questions – FHA Income Requirements
What else will underwriting look at besides income?
The underwriter will look at your assets, liabilities, credit, and income to determine eligibility.
Can I use a co-borrower if I need more income to qualify for an FHA loan?
You can use a co-borrower if you cannot qualify for the loan amount that you need.
Is there a minimum income threshold for qualifying for an FHA loan?
The minimum income threshold for an FHA loan is based upon the debt to income ratio each lender is willing to accept.
Credit scores have a huge impact on income requirements because your interest rate is closely tied to your credit scores. The higher the scores, the lower your rate will be which in turn will help to qualify for a larger loan amount.
Each type of FHA loan will have similar income requirements.
Each lender will have different DTI limits which means the income they require will also vary.
Alimony and child support can be used as income on your loan application if that income is guaranteed to continue for the next two years.
There are exceptions related to gaps in employment and income if your income has returned for at least 30 days.
Self employed individuals must meet the income requirements based upon the income they document on their tax returns after business write offs.
Part time and seasonal income can be used if it has been consistent and documented for at least two years.
Everyone who is putting income on the loan application must provide proof of that income.
Other helpful FHA Articles
How to get pre approved for an FHA loan
