In addition to credit history and assets the Income is one of the most important factors that FHA Mortgage lenders look at when determining the debt to income ratios for those looking to qualify for an FHA mortgage.

FHA Mortgage lenders require 2 years history in the same line of work. School transcripts can be used towards to 2 year requirement. To fully document your income most FHA mortgage lenders require your most recent 2 years tax returns, including most recent W2’s, 1099’s in order to verify stable predictable income and determine the debt to income ratios. For some FHA mortgage applicants that like to write off all their income. Un-reimbursed expenses can be a deal killers. FHA Mortgage lenders go by adjusted gross income on the borrower’s tax returns.


 If you are a W-2 wage earner but write off a lot of expenses on your tax returns, the write offs from your tax returns will negate the W-2 income and many times due to the write offs the chances are that you do not qualify for a mortgage loan. However, I now have a great mortgage loan program for FHA insured mortgage loan borrowers where as long as you are a W-2 wage earner, no tax returns are required and only two year W-2s are required. However, the borrower needs only to have W-2 wages and not 1099 wages. If the mortgage loan applicant has both W-2 income and 1099 income, then two years tax returns are required. As long as the mortgage loan borrower has W-2 income only, then the two years tax returns will not be used and will not be required to be submitted and the write offs from the two years tax returns will not be used.


If you are a business owner or a 1099 wage earner, you need to provide your FHA mortgage lender with 2 years tax returns and 2 year 1099 income.If the adjusted gross income is lower the most recent years income, then the income of the lower year will be used for mortgage qualifying and the two year adjusted gross income average will NOT be used. You can only use a 2 two year average if your self employment income is increasing. If the FHA underwriter sees that the adjusted gross income is declining, then then you may not be able to use the income. You may need to get a non-occupant co-borrower to qualify for the FHA mortgage loan. Tax returns are definitely required for self employed borrowers because they are the riskiest type of borrower for a lender. In addition, the FHA underwriter must get a clear picture of the self employed borrowers write off expenses on their tax returns in order calculate and average income adjusted qualifying income. Self employed borrowers should keep in mind that FHA mortgage lenders only use the average of the most recent (2) years is if the adjusted gross income after expenses if the income is  higher for the most recent year. 


FHA Mortgage applicants who are 1099 salesman including those that make more than 25% of their income on commission like  realtors, car sales, then FHA mortgage lenders will require two years 1099’s and a full two years tax returns with all pages. If the two years 1099’s are similar then a 24 months average will be used to calculate monthly gross income. However, if the mortgage loan borrower shows declining income, then the most recent lower income will be used and it will be averaged for 12 months to determine monthly gross income in qualifying for a FHA mortgage qualifying.The taxes returns are required to see how much the expenses are for the FHA mortgage applicant. The write offs are important because the gross income must be adjusted based on the loan applicants expenses to calculate income to cover the monthly mortgage payments. 


If you are a W-2 wage earner, mortgage lenders will go off the most recent paycheck stubs reflected on the past 30 days paycheck stubs and from the employer’s verification of employment. Two years W-2s are required but there is a lot of leniency with W-2 wage earners. Here are some case scenarios:

If a mortgage loan applicant has been working for a company part time status for the past two year or even less but got promoted to full time status, mortgage loan underwriters will use the full time status income to qualify for the mortgage income debt to income qualifications.

If a mortgage loan applicant has been working for the same company and got a promotion and a hefty increase in pay, the new pay will be used to calculate income as long as the verification of employment confirms that.

If a mortgage loan applicant moved jobs from one job to another job and the new job offered a high pay increase, the new job’s pay will be used to qualify income even though the W-2s for the past two years was substantially less.

If a mortgage loan applicant has had gaps in employment via W-2s, they can qualify for a mortgage as long as they found a new job within six months and the gap in employment was not greater than 6 months. If the gap in employment was longer than six months, then they would have to work in their new job for at least six months to qualify with the pay of the new job.


Bonus, Overtime, Commission, Part-time, Seasonal work can be used for income as long as the FHA mortgage applicant borrower can document that he or she has been getting overtime income consistently for the past two years. Bonus income can be used in qualifying for a mortgage as long as the mortgage loan borrower can show that they have been receiving bonus income for the past two years.



Alimony and child support income can be used as long as the mortgage loan borrower is likely to receive alimony and child support income for the next three years.



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