If you`re an independent contractor looking to buy a home, you may be wondering if you`re eligible for an FHA loan. The answer is yes, but there are a few extra steps you`ll need to take to qualify.
First, it`s important to understand what an FHA loan is. The Federal Housing Administration (FHA) insures these loans, which are designed to help low- and moderate-income individuals and families purchase homes with as little as 3.5% down.
As an independent contractor, you may find it more difficult to qualify for a traditional mortgage because your income can fluctuate and isn`t always steady. However, FHA loans take a more flexible approach to income verification, which can work in your favor.
To qualify for an FHA loan as an independent contractor, you`ll need to show that you`ve been self-employed for at least two years and have a reliable, steady income. You`ll also need to provide documentation such as tax returns, bank statements, and profit and loss statements to verify your income.
It`s important to note that if your business has experienced a significant decrease in income due to COVID-19, you may need to show additional documentation to prove that your income will be stable moving forward.
In addition to income verification, you`ll also need to meet the other requirements for FHA loans, such as having a credit score of at least 580 (or 500 with a higher down payment), and not having any recent bankruptcies or foreclosures.
Keep in mind that FHA loans require mortgage insurance, which can add to your monthly payments. However, this insurance can be cancelled once you reach a certain amount of equity in your home.
Overall, FHA loans can be a great option for independent contractors looking to buy a home. Just be prepared to provide additional documentation to prove your income and meet the other requirements. Work with a knowledgeable lender who can guide you through the process and help you determine if an FHA loan is the right choice for you.