FHA Mortgage Income Limit
The main goal of Federal Housing Administration (FHA) mortgage loans is to help moderate- to low-income individuals or families buy a home. Although there is no income ceiling on these loans, that does not mean everyone can obtain an FHA-backed mortgage. This government agency does have certain qualifications. Those other factors can also mean higher-income individuals or families need a higher down payment to obtain an FHA home mortgage.
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Loan Guarantee
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The FHA Home Loan Program does not actually loan money to home buyers. It insures mortgages made to home buyers by lenders approved to participate in the program. The FHA sets the qualifications and guidelines the lenders must follow in issuing FHA-insured home mortgages. But there is no income limit on an FHA mortgage. Since its creation in 1934, the agency has insured tens of millions of mortgages.
Loan Requirements
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The FHA home mortgage program is limited to owner-occupied residences and individuals can only have one such mortgage. In addition, the applicant must have a Social Security number, be of legal age to sign the mortgage contract and be a lawful resident of the United States. FHA mortgages do not require a certain credit score and even people who declared bankruptcy over a year earlier could qualify for a loan. However, the lender must verify the applicant's income, credit history, and assets and liabilities. In addition, applicants must show they have had a steady income for the past three years and that they have enough income to make the mortgage payments.
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Loan Limits
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There is no limit on applicants' income, unless they are applying for assistance with the down payment or other programs that help an applicant afford to buy a home and that would vary according to the amount required. However, the FHA does impose limits on the loan amount. Loan limits vary by state and by individual counties within a state. Under formulas provided to the U.S. Department of Housing and Urban Development by the National Housing Act, the FHA loan limits are set according to the county where the property is located. The program allows people with a low down payment to qualify for a home mortgage. Conversely, if the sales price for the property is higher than the FHA mortgage loan limit, individuals need a higher down payment to reduce the loan amount needed.
Loan Basics
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Lenders usually require borrowers who have less than a 20 percent down payment to purchase mortgage insurance. This insurance pays the lender the loan amount in full if the borrower defaults on the mortgage. Although the rate for FHA mortgage insurance is higher than private mortgage insurance, the FHA program allows lower down payments than lenders might otherwise approve. In addition, lenders usually add the cost of the FHA insurance to the loan amount rather than having borrowers pay the entire amount at the closing.
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