Qualifying For FHA W-2 Income Only Mortgage

Borrowers Who Need To Qualify For FHA W-2 Income Only Mortgage

 

FHA Loans are by far the most popular mortgage loan programs today. FHA Loans are not necessarily always for home buyers with bad credit. FHA Loans offer very lenient lending guidelines for borrowers who have had prior bad credit and those who have higher debt to income ratios.

Here are some great benefits of FHA Loans for home buyers:

  • FHA allows gifted funds to be used for down payment on a home purchase and for non-occupant co-borrowers to be added on a loan in the event if the borrower does not meet the maximum debt to income ratio requirements.
  • FHA also caps debt to income ratios up to 56.9% DTI if the borrower has at least a 620 FICO credit score.
  • There are no limits on the amount of non-occupant co-borrowers a borrower can add as non-occupant co-borrowers.
  • However, non-occupant co-borrowers need to be related to the borrower by marriage, blood, or law and cannot be friends of those with no relations to the borrower.
  • Many workers with W-2 income do take advantage of tax deductions on their income tax returns so they do not have as much tax liability.
  • By having larger deductions on their tax returns, it offsets the qualified income a borrower can use when qualifying for a mortgage where this can mean not qualifying for a home loan.
  • HUD is the parent of the Federal Housing Administration, also known by many as FHA. HUD has now allowed FHA borrowers to qualify for a FHA W-2 Income Only Mortgage where income tax returns will not be required by the borrower in order to qualify for a FHA Loan.

FHA W-2 Income Only Mortgage Loans

FHA W-2 Income Only Mortgage loans is now available for borrowers who have many write offs on their income tax returns. The FHA W-2 Income Only Mortgage program does not require borrowers to provide federal income tax returns and the only the W-2 Income will be used as qualifying income. However, there are rules and not all borrowers can qualify for the FHA W-2 Income Only Mortgage. The FHA w-2 Income Only Mortgage program is becoming more and more popular and those who were not eligible to qualify for a FHA Loan due to the massive write offs on their income tax returns can now qualify if they meet HUD’s FHA W-2 Income Only Mortgage lending guidelines.

Requirements To Qualify For FHA W-2 Income Only Mortgage Program

Borrowers must meet the mortgage lending guidelines below to qualify for the FHA W-2 Income Only Mortgage Program

  • To qualify for the FHA W-2 Income Only Mortgage program, the borrower must have been employed by the same employer for at least 2 years.
  • Hourly and salaried full time employees both qualify for the FHA W-2 Income Only Mortgage program.
  • Documents required are 30 days of paycheck stubs, 2 years of W-2s and the W-2s needs to be validated by the Internal Revenue Service, IRS.
  • Borrowers who have additional side jobs with 1099 income should not have any issues or impact on qualifying for FHA W-2 Income Only Mortgage Loan Program. There are cases where the 1099 may trigger the requirement of tax returns, so those with additional income as a 1099 wage earner need to be evaluated on a case by case scenario.
  • Income Tax Returns cannot be turned in if the borrower applies for the FHA W-2 Income Only Mortgage Program.
  • If the borrower shows that 25% or more of the W-2 income is commission income, this will disqualify the borrower from the FHA W-2 Income Only Mortgage Program.
  • You cannot qualify for FHA W-2 Income Only Mortgage program with non-occupant co-borrowers.
  • FHA Back To Work Due To Extenuating Circumstances mortgage loan programs cannot be FHA W-2 Income Only Mortgage Loans.
  • Only Approve/Eligible per Automated Underwriting System findings are eligible for this program.
  • Manual Underwriting FHA Loans are not eligible for FHA W-2 Income Only Mortgage loan programs.

Non-Eligible Borrowers For FHA W-2 Income Only Mortgage Program

Not every borrower can qualify for the FHA W-2 Income Only Mortgage Loan Program. Below are the ineligible borrowers for the FHA W-2 Income Only Mortgage Loan Program:

  • Self Employed Borrowers are ineligible for FHA W-2 Income Only Mortgage programs
  • Borrowers who have income reported an their schedule K-1 of their income tax returns are not eligible for FHA W-2 Income Only Mortgage programs no matter how small or large the percentage of the ownership is.
  • Borrowers who have commission income that consist 25% or more percent on their W-2 income are not eligible for the FHA W-2 Only Income Mortgage.
  • Borrowers who receive any rental income will be excluded from qualifying for the FHA W-2 Only Income Mortgage program.
  • Borrowers who earn temporary income or have inconsistent and/or periodic employment such as seasonal income, unemployment income , and contract income will not qualify for the FHA W-2 Income Only Mortgage program.
  • Borrowers who have income earned from any foreign entity and/or corporation or foreign government entity and who is compensated via foreign currency will not qualify for the FHA W-2 Income Only Mortgage program.
  • Any borrowers who is employed by a family member as their employer will not qualify for the FHA W-2 Income Only Mortgage program.
  • Any borrowers who is employed by a non arms length transaction party such as employees of the mortgage lender will not be eligible for this program.
  • Borrowers who get dividend as well as interest income and/or capital gains will not qualify for the FHA W-2 Only Income Mortgage program.
  • Those with other non-taxable income and/or non-employment income which is reported on their 1099 forms which is used to qualify for their mortgage such as social security income, pension income, and other income will not be eligible.
  • Borrowers with tip income that is reported on their IRS Form 4137 that is not have been reported by their employer on their W-2s that is used to qualify will not qualify for the FHA W-2 Income Only Mortgage program.
  • If the automated findings require tax returns, then tax returns will be required.
  • Under no circumstances can income tax returns be submitted to underwriting. If the income tax returns were to be submitted to underwriting, then they are automatically disqualified from qualifying for the FHA W-2 Income Only Mortgage program.

Who Offers FHA W-2 Income Only Mortgage Loan Programs

The Gustan Cho Team at CrossCountry Mortgage NMLS 3029 offers FHA W-2 Income Only Mortgage Programs as well as Fannie Mae W-2 Income Only Mortgage Programs for Conventional Loans.

  • W-2 Income Only mortgage loans are available with both FHA Loans as well as Conventional Loans.
  • Fannie Mae is the only Conventional Loan program that allows W-2 Income Only Mortgage.
  • Freddie Mac does not allow it.

If you have higher debt to income ratios due to a lot of write offs on your income tax returns and need to know more about both the FHA W-2 Income Only Mortgage Loan Programs and Fannie Mae W-2 Income Only Mortgage Loan Programs, please contact Gustan Cho NMLS 873293 at CrossCountry Mortgage Inc. NMLS 13589 at 262-878-1965 or email gcho@gustancho.com. You can text Gustan Cho for faster response at 262-716-8151. CrossCountry Mortgage NMLS 3029 is a national Fannie/Freddie/Ginnie Mae Direct Lender and is licensed in all 50 states. The Gustan Cho Team at CrossCountry Mortgage is available 7 days a week, evenings, weekends, and holidays to take your call and/or your email inquiries. CrossCountry Mortgage goal and mission is to close all of our loans in 21 days or less.

 
The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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