FHA loans are government-backed mortgages designed to make homeownership more accessible. With low down payment options and flexible credit requirements, they’re a popular choice for borrowers with lower credit scores or those looking to buy a home with as little as 3.5% down.
When you apply for an FHA loan, lenders look at your current and previous two years of employment to ensure you have a steady income to repay the loan. It’s important to understand these guidelines so that you can be prepared.
Questions about your income or employment eligibility? Contact a Paddio loan specialist today.
FHA Loan Income Requirements
As the FHA loan program is fairly flexible, there is no set minimum or maximum income limit to consider. Instead, the Federal Housing Administration and FHA-backed lenders look at the consistency and stability of the borrower’s income. The FHA and its lenders want to know you can consistently meet repayments and not default on the loan.
FHA lenders need proof of steady income over the past two years. Here are some common documents lenders request to verify income:
Pay stubs
W-2s
Investment statements
Annual tax returns
Alimony or child support documentation
The specific documents vary depending on your main sources of income. Lenders also consider the level of debt you have. While FHA debt-to-income (DTI) requirements vary, your approval chances are best if your DTI ratio is 43% or lower.
FHA Loan Employment Requirements
FHA employment requirements may vary by lender since the FHA only requires verification of borrowers’ employment for the past two years, but all FHA-approved lenders want information about your past employment record, position qualification, previous training and/or education, and confirmation from your employer of continued employment.
Two-Year Work History Rule
In addition to income amount and consistency, FHA guidelines require borrowers to share their work history for the past two years. However, there’s no rule on how long you must stay at any one job. You can have multiple different jobs with different employers during those two years and still qualify for an FHA loan.
That means you won’t have to wait a whole year at your job to get approved for a mortgage. Instead, the lenders just want to see that your income and employment have remained stable during that two-year window.
Can you get an FHA loan without 2 years of employment?
If you don’t have two years of full work history, don’t worry. The FHA will consider your application if those two years involve a documentable exception, such as military service or schooling.
Rules On Recent Career Changes
On a similar note, if you’ve made a recent career change, you can still get an FHA loan.
Switching fields of work is not usually an issue for FHA loan eligibility. The lender will just want to see that your current job has a stable income and is likely to continue.
FHA Loan Employment Gap Exceptions
Certain scenarios of gaps in employment are allowable. The only rule is that the borrower must prove they were fully employed for six months before the FHA case number was first assigned.
The documentation required to explain employment gaps depends entirely on the reason for your employment gap. Here are some common exceptions to the two-year employment rule and what lenders usually request for verification:
Documentation Needed for Employment Gaps
| Borrower Scenario | Documents Required |
|---|---|
| Recent military separation | Provide discharge papers showing your active-duty service dates and separation date. |
| Full-time student | Submit your college transcripts and any scholarship or grant information. |
| Temporary work leave | Provide proof of your intent and right to return to work. |
| Medical condition | Submit a physician’s letter explaining the condition. If you received disability benefits, you may need to provide proof. |
| Raising children or caregiving | Provide a written explanation and supporting documents, such as birth certificates or medical records. |
| Layoff or company closure | Provide a termination letter, unemployment benefits records, or a written explanation. |
| Relocated for spouse's job | Submit a relocation letter from your spouse’s employer to help explain the gap. |
Have a scenario you don’t see? A Paddio loan specialist can work help!
Any gaps in employment that are longer than 6 months within the past two years must be explained and documented where possible so that the lender can accurately assess and verify the information.
FHA Loan Self-Employed Guidelines
Self-employment also counts toward the two-year work history, but lenders require additional documentation to verify income and employment. Additionally, the type of business usually doesn’t matter. It can be a sole proprietorship, corporation, LLC, S-Corp, or partnership.
The FHA and lenders especially want to know that you have enough income from your business to make payments on the loan. They will ask for at least two years of individual and business tax returns, profit and loss statements prepared by a tax professional, and balance sheets.
However, if you don’t have two years of self-employment records, getting approved for an FHA loan can be difficult. You may be better off waiting until you have two full years before applying for an FHA loan, but some lenders will make an exception to the two-year rule if over the past two years, you have been self-employed for at least a year and you were in the same line of business before that. Since you have experience in the field, your business will likely be profitable and less risky. However, this process isn't guaranteed, and not all lenders accept it.
Lenders all have their own individual FHA loan employment requirements when assessing affordability. It’s worth speaking to an FHA loan specialist who can give you more specific advice on your particular situation. In the meantime, you can learn more about general FHA loan requirements to better understand where you stand should you decide to apply.
