Income Verification with FHA Home Loans

Income documentation is a very critical component of the loan approval process for FHA loans. FHA streamline is the only loan program that does not require full documentation of income. In order to qualify for the FHA streamline program, the homeowner must be looking to refinance their home. Moreover, it must already have an FHA insured mortgage in place. The mortgage must be current. The mortgage refinancing must include lower payments and interest rates. These mortgages do not allow cash to come out. If a lender advertises a "streamlined" FHA mortgage process, look at the details. That often means they will make the paperwork easier to handle. Income verification with FHA loans is necessary for all other FHA home loans.

You will need to provide full income documentation on all other types of loans. This means that you need to bring in copies of income tax returns and W-2 forms. You will also need to gather documentation on retirement or Social Security income. Income from alimony, child support, and maintenance has different guidelines. The basic formula is establishing a verifiable stable source of income for a minimum of two years prior to the application. They also need to see if that income may be stable for at least three years into the loan period. When going through income verification with FHA loans, you need to bring in the details.

In addition to meeting the guidelines for income verification with FHA home loans, you will need verification of employment from your employer. If you are on a salary or work an hourly job, your employer will need to fill out and sign a statement to verify you are an employee in good standing with the company. If you are a small business owner, you will need to provide financial documentation of your company and its business. These forms of verification help the lender determine that you meet the FHA requirements before submitting the loan documents to HUD for approval. It saves time and hassle for the lender and the borrower in the long run.

These requirements are to protect you from taking too large a loan. One of the factors in the recent housing problems is lenders loaning money on homes that were too expensive for a particular family's income levels. The income verification process helps the lender and HUD hold each borrower to the same standards. If you can meet those standards, then you are a good risk for them to take on giving you a new mortgage.