Can overtime income count for an FHA loan?

Yes, overtime income can be used for FHA qualification, but only if it has a 2-year history and is likely to continue. A letter from your employer confirming that overtime is available and not seasonal is helpful. FHA underwriters average the income over 24 months; a spike in overtime pay in the most recent year is not fully counted unless the history supports it.

Can bonus income qualify for an FHA loan after just 1 year?

Typically no. FHA guidelines require a 2-year history of bonus income to use it for qualifying. However, if your bonus is contractually guaranteed (part of your employment agreement), a lender may count it after 1 year with documentation. The income is averaged over the period it has been received.

Can trust income qualify for an FHA loan?

Yes, trust income can be used if it is ongoing, documented through the trust agreement, and the borrower can demonstrate 3 years of continued receipt. The lender will want a copy of the trust document and bank statements showing consistent deposits.

Can rental income offset debt on an FHA application?

If you own a rental property and receive rental income, FHA allows you to use 75% of the gross rent shown on your tax returns as qualifying income, which reduces your effective DTI. If you're converting your current primary residence into a rental to buy a new home with FHA, the rules are stricter, documentation of a lease and equity in the departing residence are required.

What is the FHA loan limit in Kern County for 2026?

The 2026 FHA loan limit for Kern County is $541,287 for a single-family home, $693,050 for a duplex, $837,700 for a triplex, and $1,041,125 for a 4-unit property. These limits cover the vast majority of active listings in the Bakersfield market.

Can I get an FHA loan if I was recently self-employed?

FHA requires 2 years of self-employment history to use self-employment income. If you transitioned from W-2 employment to self-employment in the same field within the last 2 years, a lender may use combined income, but the most recent 2-year tax returns are required. New self-employed borrowers with under 1 year of history typically cannot use that income for FHA qualification.

Can I buy a multi-unit property with an FHA loan as a first-time buyer?

Yes. FHA allows the purchase of 2–4 unit properties with 3.5% down as long as the borrower occupies one unit as their primary residence. This is one of the most underused strategies in the Bakersfield market, a duplex where you live in one unit and rent the other can dramatically reduce your net housing cost.

FHA Gift Funds Rules: Who Can Give (Yes, Cousins), the Gift Letter, and the Paper Trail

Yes, a cousin can give you gift funds for an FHA loan. So can a parent, grandparent, sibling, aunt, uncle, employer, or even a close friend. FHA has the most flexible gift rules of any major loan program, and the entire 3.5% down payment and your closing costs can come from a gift. What trips people up is not who gives the money. It is how the money moves and how it is documented.

Who Can Give FHA Gift Funds

HUD allows gifts from:

Family members: spouse or domestic partner, child, parent, grandparent, sibling, aunt, uncle, first cousin, niece, nephew, in-laws, and step-relatives
A close friend with a clearly defined, documented relationship to you
Your employer or labor union
A charitable organization
A government agency or public entity with a homebuyer assistance program

Who cannot give: anyone with a financial interest in the sale. That means the seller, the real estate agent, the builder, or anyone connected to them. A "gift" from an interested party is treated as an inducement to purchase, and it gets subtracted from the price or disallowed. The one exception is a family member who is also the seller, which is a gift of equity (covered below).

What Makes It a Gift

A gift is money with no expectation of repayment, ever. Not a formal loan, not an informal "pay me back when you can," not a verbal understanding at Thanksgiving. If there is any repayment expectation, it is a debt, and it has to be disclosed and counted in your debt-to-income ratio. Calling a loan a gift on a mortgage application is mortgage fraud, even between family members.

The Gift Letter: What It Must Include

Every gift needs a signed gift letter. It must show:

The donor's name, address, and phone number
The donor's relationship to you (for a friend, describe how long and how you know each other)
The dollar amount of the gift
The address of the home you are buying, once you have one
A clear statement that the money is a gift and no repayment is expected or required
The donor's signature, and on some lenders' forms, yours

A text message or an email does not count. Use the lender's gift letter form, because it already has the required language.

The Paper Trail: How the Gift Has to Move

This is where files get delayed. The underwriter needs to see the money leave the donor and arrive with you or at escrow:

The donor's bank statement showing the funds were in their account
A copy of the check, wire confirmation, or transfer record
Your bank statement showing the deposit, or the escrow company's receipt if the gift is wired straight to escrow

Two things to avoid. Cash: FHA does not accept cash on hand as a gift source, because it cannot be traced. And pass-throughs: if the donor's account shows the money arriving the same week it goes out to you, the underwriter will ask where it came from. If the donor borrowed it, that has to be documented too.

Any large deposit in your account will be questioned, gift or not. Your lender will ask you to explain and document it, which is why I tell clients to tell me about a gift before the money moves. The large deposit rules explain what underwriters consider "large" and what they ask for.

How Much Can Be Gifted?

All of it. With a 580 or higher credit score, the entire 3.5% minimum down payment can be a gift, and so can your closing costs. There is no program limit on the gift amount. Below 580, FHA requires 10% down, and some lenders want part of that from your own funds.

Taxes are the donor's issue, not yours, and usually not an issue at all. In 2026 a donor can give up to $19,000 per person without filing a gift tax return, and larger gifts only require a filing. Actual gift tax is not owed until the donor passes a lifetime exemption that is in the millions.

Gift of Equity: When a Family Member Is the Seller

If you are buying from a parent, grandparent, or other family member, they can sell to you below market value and the difference counts as a gift of equity. Example: Mom's house appraises at $400,000 and she sells it to you for $386,000. That $14,000 of equity covers your 3.5% down payment, and you may not need to bring cash for it at all. FHA allows gifts of equity only from family members. The appraisal and a gift letter for the equity amount are required.

FHA vs. Conventional vs. VA Gift Rules

FHA: the broadest donor list, including close friends and employers. 100% of the down payment and closing costs can be gifted.
Conventional loans: gifts must come from a relative, fiance, or domestic partner. On a 1-unit primary home, the entire down payment can be a gift. On a 2-4 unit home or a second home with less than 20% down, you contribute at least 5% from your own funds. Gifts are not allowed on investment properties.
VA: no down payment is required, so gifts usually cover closing costs or reserves. VA is flexible on donors as long as they have no interest in the sale.

Gift funds can usually be combined with down payment assistance programs, which is how a lot of Kern County first-time buyers close with very little of their own money.

Common Mistake

Moving the money too early in the wrong way, or too late in a rush. The worst version I see: a parent withdraws $20,000 in cash, hands it over, and the buyer deposits it. Now there is no paper trail, the deposit cannot be sourced, and the gift cannot be used. The fix is simple. Wire or write a check from the donor's account, keep the statements, and sign the gift letter at the same time.

Dan's Take

Gift funds are one of the most legitimate and underused paths to buying a home in Bakersfield. Parents and grandparents helping is completely normal, and FHA was built to allow it. In my underwriting years, the gift itself almost never caused a problem. The documentation did. A missing donor statement, a letter without the "no repayment" language, or a cash deposit nobody can trace will hold up a closing more often than a credit score issue will. Tell your lender about the gift on day one, use their letter, and wire the funds. That's it.

Bottom Line

A cousin, and a long list of other donors, can give you gift funds for an FHA loan. Get the gift letter right, keep a clean bank-to-bank paper trail, avoid cash, and the entire down payment can come from someone who wants to help. Run your numbers with the down payment calculator, then call me before the money moves and I'll tell you exactly what your donor needs to send.