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FHA Income and Employment Requirements

Current Income and Employment Requirements for FHA Loans
Guidelines Related to Job History, Income, and Debt-to-Income Ratios

FHA Loan – Income and Employment Requirements

This page covers the current income requirements for FHA loans. This includes guidelines related to income, debt, and employment. If you do not see answers to your questions here, please do not hesitate to give us a call or send us a request for a free consultation.

FHA Loan Income Requirements / Debt Guidelines

You may be curious how much income is needed to qualify for an FHA loan.  FHA loans actually do not have a minimum income requirement, nor are do they have any maximum limits on income. The important aspect of your income is actually how much debt you have compared to your bring home income.  These are called your “debt-to-income ratios”.

There are two debt-to-income ratios that are evaluated when you apply for a FHA loan. The FHA guidelines state that your mortgage payment not exceed 29% of your income. This number represents the “front end ratio”.  The second part of your debt-to-income ratios that is looked at is your total monthly debt obligations compared to your income.  This is called the “back end ratio” and the maximum amount allowed is 43%. This accounts for your total debts that have monthly payments and show on your credit report.

You can view examples for both types of ratios below:

Front DTI Ratio

– Mortgage Payment – $1,000/month
– Monthly Income – $4,000/month
– Frontend Ratio = 25%

As you can see, a monthly mortgage payment of $1,000 compared to a monthly income of $4,000 is 25%. This number represents the “frontend ratio”. A 25% front end ratio qualifies, as it is below the maximum of 29% maximum that is allowed.

Back DTI Ratio

– Mortgage Payment – $1,000/month
– Auto Payment – $300/month
– Credit Cards – $200/month
– Total Recurring Debts = $1,500/month
– Monthly Income – $4,000/month
– Backend Ratio = 37.5%

In the second example, the back DTI ratio, which is the monthly mortgage payment combined with other recurring debts, equals $1,500/month. With $4,000 in income, $1,500 a month in debt payments would equal a 37.5% debt-to-income ratio, This ratio also qualifies, as it is below the maximum 43% backend DTI ratio allowed.

Using the above example of a $1,000 mortgage payment, and $4,000/month income, if this example were to instead have $900 in recurring debts, totaling $1,900 in income, they would not qualify. This would have a 47.5% total backend ratio ($1,900 / $4,000 is 47.5%). The maximum of 43% would not be meet.

Please Note:  There are cases which one may still be approved if there ratios are too high. If you have sufficient “compensating factors”, such as good credit, savings, long employment history, or other factors that weigh in positively for you, you may still get approved with higher DTI ratios.

Click Here to to Get Pre-Approved for a FHA Loan.

FHA Loan Employment Requirements

The rules and qualifications related to employment are rather lenient for FHA loans.  Exactly how long must you be on the job to get a FHA loan?  The employment requirements for a FHA loan do not specify any length of time.  How it works is the last two years of your employment will be looked into.  If you have changed jobs or had short periods of unemployment, you may still be approved.  The primary consideration is the likelihood of continuous employment and your ability to repay the loan.  As long as you are able to present job history and who current employment, it should hopefully satisfy FHA job requirements.

Frequently Asked Questions:

Exactly which monthly bills are factored into DTI ratios?
The only bills that are factored into your debt to income ratios are your new mortgage payment, and other monthly recurring payments which show on your credit report. These usually are auto loans, personal loans, and credit card payments. Other types of bills which are not reflected on a credit report are not counted (such as utilities and cell phones).

If I am not approved due to high debt levels, can I pay those off and reapply?
Yes, if you have the means to do so, paying off debt can both improve your credit, and also would lower your monthly debt-to-income ratios.

Are there any income limits for FHA loans?
Unlike USDA loans, which are strictly for households who make less than the USDA income limits allow for their location, FHA loans have no such barriers. There are not any minimum or maximum income limits for FHA loans.

Does recent unemployment affect eligibility?
If you have been on your current job for over 6 months, and can provide 2 years of proof of income (such as bank statements or tax returns) from before your period of not having a job, you may still qualify. If your job was in an unrelated field or industry, it will have to be looked at on a case by case basis.

Does frequent job changes affect eligibility?
If you change jobs within the same industry or general line of work, it is more acceptable. If you change jobs frequently in different fields, it will need to be closely looked at. Ultimately, you need to show you have the ability to make consistent payments. Gaps in employment in the last 2 years or frequent job changes could affect your application. Do not let it discourage you from applying though, as you still may be approved.

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