Getting approved for an FHA W2 Only Program can be a great way to minimize documentation and confusion. It’s fairly common for borrowers to provide more documentation than the mortgage lender needs. Today we’ll cover everything you need to know about how to get approved for an FHA W2 Only Program. 

When are you eligible for an FHA W2 Only Program?

Let me be perfectly clear: “W2 Only” does NOT mean if you send in your W2s today, you’re going to close on your house tomorrow. 

“W2 Only” means you don’t have to provide tax returns. 

Not having to provide tax returns is a huge benefit for many people for multiple reasons. 

But to keep it simple – not having to provide tax returns keeps things clean and straightforward. 

To qualify for this type of mortgage on a home purchase or refinance, here are the main highlights that will be considered:

• Must be a wage earner (W-2 employee) for a company you do not own
• Minimum credit score is 600
• Must not be employed by family
• If you own rental property, you must be able to qualify for the new mortgage without using rental income

You also need to be sure you’re within the FHA county loan limits in your area. Check your county loan limits here.

If you do not meet the requirements listed above, here are more ways to get approved without providing tax returns.

If you do meet the requirements listed for the FHA W2 Only Program, let’s break down each of those items further.

Wage Earner

This means you are paid an hourly wage or receive salary pay. 

Commission paid employees are also eligible for this program as long as they are W-2 employees, NOT 1099 employees.  

Credit Score

Although FHA will allow as low as 500 credit score, most lenders are not doing them below 580 credit score. 

When you are below 600 credit score, you can absolutely expect your file to be looked at with more of a microscope. They will require more conditions to be met in order to hedge the risk of approving a low credit loan. 

If you’re below 600 score the lender may have overlays which require tax returns, even if you’re a wage earner. 

This is because the underwriter knows there is a strong chance they will get audited on a low credit file. So it’s mostly a CYA thing to be safe. 

Family as an Employer

If you’re employed by family, you’re required to provide tax returns. 

The underwriter needs to verify that what you file with the IRS matches your W2s. 

For that reason the FHA W2 Only Program would not be an option. 

Rental Property Currently Owned

If you own rental real estate and are looking to get approved for the new FHA loan, your debt to income ratio will need to qualify without the rental income if you’re looking to get approved without having to provide tax returns. 

What documents will be needed besides W2s?

As mentioned in the beginning, the FHA W2 Only program means you don’t have to provide tax returns.

Everyone’s scenario is unique and different, but here is a basic list of items you can expect will be needed:

• 2 years most recent W2s
• 30 days most recent pay stubs
• 2 months bank statements (proof of funds for home purchase, or reserves for refinance if applicable)
• Homeowners insurance contact
• Valid government issued ID

The best thing you can do to set yourself up for success is to provide all documents in legible format, including all pages. 

A big mistake borrowers make is providing pictures of documents that are cut off or not legible. This leads to multiple requests for the same documents, and slows things down. 

If the document says page 1 of 7, be sure to provide all 7 pages to avoid duplicate requests. 

I can’t stress enough the importance of providing legible documents including all pages. When borrowers follow that guidance the experience is ideal for everyone.

Bonus Tip

If you’re buying a home, the most common thing that slows the process down is waiting until the last minute to provide proof of funds for down payment and costs. 

Whether you’re doing a 401K withdrawal, or getting a gift from family for down payment, be sure to get that in order sooner than later. Putting together that paper trail can take longer than expected. 

In Summary | FHA W2 Only Program Requirements

The FHA W2 Only Program is a great way to simplify the mortgage approval process. This is because doing an approval without tax returns simplifies the underwriting review, and reduces the need for unnecessary documentation. 

The FHA W2 Only Program is a perfect option if you:

• Are a wage earner (not self-employed)
• Have 600+ credit
• Not employed by family
• Don’t need rental income to qualify

I invite you to reach out.

Get your questions answered.

We have been successful in getting many borrowers approved all over the country for the FHA W2 Only Program.

You’re welcome to reach out and get your questions answered. If we cannot help, we will certainly do our very best to point you in the right direction.