Many questions start to brew when one begins to talk about FHA Mortgage Loans. One common question among borrowers is, “Am I earning too much or too little to qualify for an FHA mortgage loan?”
The FHA loan is a government-guaranteed loan program offered by the United States Federal Housing Association. Historically, this type of government loan has allowed low-income American families to afford decent housing. FHA backs approved lenders who allow these families to borrow money so they could purchase a house which they would not be able to afford, otherwise, with a conventional loan.
It can be noted that this federal assistance for housing sprung during the 1930’s to address the drastic rise of numbers of foreclosed homes and defaulted loans. During the Great Depression, FHA has helped bring back homeless families into decent and livable homes and such endeavor has continued up until today.
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How little is too little?
The good news is, the FHA does not have a minimum or maximum income requirement. What the Federal Housing Administration is concerned about is if the borrower has a steady income. So long as the borrower can prove the consistency of his/her income sources for at least three years, he/she can qualify for the loan.
One thing that the FHA considers is the borrower’s “Effective Income”. This is calculated by the FHA-approved mortgage lender to determine if, indeed, the borrower’s income is “effective” enough to pay the loan’s monthly payments and have enough left to sustain other household expenses. For this reason, there would be a need to check on his/her debt-to-income ratio, income verification, employment history and other factors to determine eligibility.
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How much is too much?
Although the FHA loan’s goal is to help low-income borrowers afford a home, it is not exclusive to them. The FHA has not set limits as to how much is “too much” income to qualify for this loan. For as long as the borrower meets the criteria, then he is FHA loan eligible.
As in any government-backed loan programs, FHA-approved lenders may have additional requirements that the borrower would need to comply for. Speaking and shopping for lenders may be a bit of additional work and expenses, but finding a good loan that fits the borrower’s needs may mean a big difference. With FHA’s lenient qualifications, it would be much easier to qualify if the borrower discusses his/her loan plans with a reputable loan professional.