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FHA Mortgage Loans are generally easier to qualify for than a more Conventional Home Loan from Fannie Mae or Freddie Mac. One reason for this is due to the fact that FHA Underwriters are able to look at more “non-traditional” income from a household – either as qualifying income, or “off-setting income” for those with higher debt to income ratios.
Income Qualifications FHA Mortgage Loans in NC
Specific income qualifications we use to qualify borrowers for FHA Mortgage Loans in NC:
- FHA allows us to “count” part-time income if you have more than an 18 month history of working 2 jobs.
We can also count tips, as long as you report them!
Many people in North Carolina working in the IT field are working on long-term contracts, they are not actually the employee of the company where their office is. If you’ve been working on contract for over 18 months we can generally get the loan approved (takes some extra work!).
If you are laid off every year at the same time, we can still get your loan approved. We justgot a loan approved for a guy who works at a local University in their food services department. Every year, right after graduation in May, he’s laid off. In August, he is rehired. He’s done this for 5 years. Once he receives his August paycheck (in a few weeks) we will be able to close his loan! We could count his unemployment AND his regular income from the University / State to qualify him!
As you can see, theIncome Qualifications FHA Mortgage Loans in NC are much easier than those for a Conventional or USDA Home Loan!
Using Rental Income to qualify for a FHA mortgage Loan can be tricky – if this is the situation you are in, please click here for details.
One of the first questions we will askwhen we speak with you…is how much of your total income youfeel comfortablespending on housing. This ratio of Gross Income to Housing Expense helps the lender decide whether you can comfortably afford a home.
When you are qualifying for a loan, a we will use your gross income. That means all the money you earn before taxes, including overtime, commissions, dividends and any other sources.Again, we are looking for the income BEFORE insurance and any money goes out to 401K. If you receive Social Security or Pension income – we will gross that income UP for qualifying!
Your total monthly housing expense as a percentage of your monthly income is called the housing expense (a.k.a.: front-end) ratio. FHAwants a ratio ofabout 29% of your incometo your house payment (including the mortgage, property taxes, mortgage insurance,hazard insurance and any Home Owner Association Dues).
Calculate what your new monthly mortgage payment should be by using the formula:
Gross Monthly Income multiplied by 29% = Maximum TOTAL Mortgage Payment.
Especially in situations when someone is just entering the job market the 29% of gross income just doesn’t “buy” the house of your dreams! That’s one of the benefits of easier qualifying guidelines for FHA home loans! To qualify, you’re allowed to spend up to 34% of your income on your house payment, as long as everything else in your application shows that you can handle the “stretch.” (READ, as long as you don’t have a ton of other payments, like a $500 car payment!). If you qualify for the NCHFA First Time Home Buyer Program, then we might be able to offset higher ratios with a Mortgage Tax Credit!
Another thing the FHA Mortgage Underwriter will look at in considering your loan for approval isthe difference in your housing expense now to the expense you’ll have if you buy a home.(It’s called Payment Shock) The smaller the increase, the stronger your application looks. So if you are paying $1000 now and your new payment will be $1400, that’s probably okay if your housing ratio is not too high.
If you are paying $1000 a month now, and your new payment is going to $1800… and you have a fairly high housing ratio… we are going to look and see that you have been SAVING money every month at $1000. We can use that information as an offsetting factor / reason to make the loan!
If you have questions about Income Qualifications FHA Mortgage Loans in NC, and you are looking for the BEST Mortgage Rates – please call Steve and Eleanor Thorne, 919-649-5058. We are Professional Mortgage Planners with over 20 years of experience closing FHA Home Loans in NC!
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About Eleanor Thorne
I see myself differently than most loan officers in the Cary/Raleigh market. As a rare Cary native, I see myself as an expert on the area, on mortgage industry changes & factors that effect rates! I've lived in Cary since 1968 - and I'm second generation "mortgage." I work with my husband, Steve Thorne Mortgage Loan Originator #60596 Equal Housing Lender
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I hope things get better i our local area
I try and answer all questions :)
FAQs
No Monthly Minimum Income Requirement: Income must be verifiable and consistent for the last two years. However, there is no minimum amount a borrower must make in order to qualify for an FHA loan.
What is the income limit for first-time home buyers in NC? ›
Requirements for NC Home Advantage Mortgage
To be eligible for the NC Home Advantage Mortgage program, you must: Purchase a home in North Carolina. Make the purchased home your primary residence within 60 days of closing. Have an annual income below $134,000.
What counts as income for FHA loan? ›
Your income may be earned through a traditional job, owning a business, part-time work, public assistance, retirement income, or investment income. Whatever the source, an FHA lender wants to know that you will continue to receive the same gross (pre-tax) monthly income for the foreseeable future.
What is the FHA projected income rule? ›
According to FHA rules, "Projected or hypothetical income is not acceptable for qualifying purposes." But there are exceptions to the rule. For example, according to the FHA, money from raises, annual bonuses, and cost-of-living style pay increases can and should be used as verifiable or effective income.
Who is eligible for NC 1st Home Advantage down payment? ›
Am I Eligible? You may be eligible for NC 1st Home Advantage Down Payment if: You are a first-time home buyer (you haven't owned a home as your principal residence in the past three years) or a military veteran or are buying in a targeted census tract. You meet the income and sales price limits.
How much house can you buy per income? ›
Lenders often use the 28/36 rule as a sign of a healthy DTI—meaning you won't spend more than 28% of your gross monthly income on mortgage payments and no more than 36% of your income on total debt payments (including a mortgage, student loans, car loans and credit card debt).
What will disqualify you from an FHA loan? ›
The three primary factors that can disqualify you from getting an FHA loan are a high debt-to-income ratio, poor credit, or lack of funds to cover the required down payment, monthly mortgage payments or closing costs.
How much income is too much for an FHA loan? ›
There's also no maximum income requirement for an FHA loan, so you don't have to worry about earning too much to qualify. These loans are ideal for those who want a lower down payment, and for those with lower credit scores.
What is the FHA 12 month rule? ›
FHA First Mortgage
Borrower must have owned property for 12 months AND if encumbered by a mortgage made payments for the last 12 months within the month due.
What is the FHA 3 job rule? ›
“If the Borrower has changed jobs more than three times in the previous 12-month period, or has changed lines of work, the Mortgagee must take additional steps to verify and document the stability of the Borrower's Employment Income.
This means that the maximum monthly mortgage payment is limited to 75% of the total rental income. This percentage must be at least enough to cover the mortgage payment known as PITI (Principal, Interest, Taxes, and Insurance).
What makes you qualified for an FHA loan? ›
FHA loans have a low minimum credit score and down payment requirement, which makes them especially popular with first-time homebuyers. You can get an FHA loan with a credit score as low as 580 if you have 3.5 percent of the home's purchase price to put down, or as low as 500 with 10 percent down.
What is the NC Homeowners Grant? ›
Eligible applicants can receive up to $30,000 of the sales price in down payment assistance in addition to receiving closing costs assistance up to 5% of the sales price. The program will also offer homebuyer education and counseling.
What is the $15000 NC home advantage program? ›
NC 1st Home Advantage Down Payment
If you are a first-time home buyer or eligible military veteran and qualify for an NC Home Advantage Mortgage™, you may be eligible for $15,000 in down payment assistance with the NC 1 st Home Advantage Down Payment.
What qualifies you as a first-time home buyer in NC? ›
NCHFA NC Home Advantage Mortgage
A first-time homebuyer is considered someone who hasn't owned a home in the last three years. The program offers a fixed-rate mortgage, either a conventional, FHA, VA or USDA loan. Here are the requirements to qualify: Your annual income is not over $134,000.
What is considered income when applying for mortgage? ›
Your gross income: The total amount of your earnings before taxes and deductions are taken out. In addition to your monthly income from wages earned, this can include social security income, rental property income, spousal support, or other non-taxable sources of income.
What are the rules for hourly income for FHA loans? ›
“For employees who are paid hourly, and whose hours do not vary, the Mortgagee must consider the Borrower's current hourly rate to calculate Effective Income.” The rulebook adds that for employees who are paid hourly and whose hours vary, the lender must average the income “over the previous two years.
What are the guidelines for grossing up income for FHA loans? ›
What Gross-Up Percentage Is Used? Conventional loans: 25%; higher if the applicant pays more in taxes. FHA loans: 15% or the tax rate paid on the previous return.
What does FHA consider declining income? ›
Income from a business with a greater than 20% decline in income over the analysis period is not acceptable. If there has been a 20% or greater decline, the income is still deemed stable if: The reduction was the result of documented extenuating circ*mstances.
