1. What counts as income? Are bonuses included? Home Ready and Home Possible have Avg Median Income limits (Philadelphia $84K)- I meet this requirement if I don't include bonuses (from referrals and performance so non-recurring) but won't if bonuses are counted.
2. Would it be less expensive for me to get an FHA loan or a Home Ready / Home Possible loan? Are there any calculators available? My understanding is what could potentially make the difference is the interest rate which is dependent on my credit score (which is 740+).
Any additional advice would be greatly appreciated (first time investor). Thank you in advance!
Lender · Cleveland, OH · Member since 2011 · 588 posts · 437 votes
4y
@Ada Li The operative word for income is "qualifying income". If you receive other income that you do not need to qualify then it does not disqualify you from the Homepossible loan
For example....Lets say you are looking at a 2-4 unit property just south of Lexington KY and you see there is a qualifying income limit of $69,840. Let's say you have a sales job where your salary is $64,000 and you make a commission of $36,000 per year. You made $100,000 last year so you will be disqualified from the program..... Not so fast. If your lender can get your debt to income ratios to work using just your base income then you can qualify for the program.
Homepossible is a superior loan mostly because of the differences in PMI that @Dave Skow referenced. Another advantage is that a seller is usually much more likely to accept an offer with conventional financing when compared with FHA financing
Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
4y
@Ada Li- are you buying an investment (( rental ) property or a prinary residence ? I assume a primary residence ...1) bonus / OT / commision income is normally used and included if its been consistently received for 2 yrs ...if you are on a job for less than 2 yrs - then an average of the bonus income will be calculated and used 2) FHA loan might have better rate and loan fee ...but it will also have permanent mortgage insurance and a hugh addtional fee of 1.75% ( upfront mtg ins fee ) ..there is a conventional 97% ltv program that has no income limit and is avaiable if you are a first time buyer
Lender · Cleveland, OH · Member since 2011 · 588 posts · 437 votes
4y
@Ada Li The operative word for income is "qualifying income". If you receive other income that you do not need to qualify then it does not disqualify you from the Homepossible loan
For example....Lets say you are looking at a 2-4 unit property just south of Lexington KY and you see there is a qualifying income limit of $69,840. Let's say you have a sales job where your salary is $64,000 and you make a commission of $36,000 per year. You made $100,000 last year so you will be disqualified from the program..... Not so fast. If your lender can get your debt to income ratios to work using just your base income then you can qualify for the program.
Homepossible is a superior loan mostly because of the differences in PMI that @Dave Skow referenced. Another advantage is that a seller is usually much more likely to accept an offer with conventional financing when compared with FHA financing
1. What counts as income? Are bonuses included? Home Ready and Home Possible have Avg Median Income limits (Philadelphia $84K)- I meet this requirement if I don't include bonuses (from referrals and performance so non-recurring) but won't if bonuses are counted.
2. Would it be less expensive for me to get an FHA loan or a Home Ready / Home Possible loan? Are there any calculators available? My understanding is what could potentially make the difference is the interest rate which is dependent on my credit score (which is 740+).
Any additional advice would be greatly appreciated (first time investor). Thank you in advance!
1. The loan officer can simply not "document" or "claim" income that they don't want to use, if that'll get you below the applicable income limits.
2. If you have good credit, the conventional programs (Home Ready and Home Possible) will likely be better financing overall. On top of that, relators discriminate against FHA loans, so you dodge that bullet, in the event of a multiple offer situation.
Lender · Boston, MA · Member since 2018 · 171 posts · 137 votes
4y
@Ada Li already a lot of great responses here but...
1. What counts as income? Are bonuses included? Bonus income does not need to be included, if you don't need it to qualify for the loan.
2. Would it be less expensive for me to get an FHA loan or a Home Ready / Home Possible loan? Are there any calculators available? With good credit, the conventional loans will certainly be more cost effective.